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BANKING  THROUGH  THE  AGES 


Digitized  by  the  Internet  Archive 

in  2012  with  funding  from 

LYRASIS  members  and  Sloan  Foundation 


http://archive.org/details/bankingthroughagOOhogg 


-' 


From  a  Painting  by  George  Harcourt 


Royal  Exchange,  London 


GRANTING  THE  CHARTER  FOR  THE  FOUNDING 
OF  THE  BANK  OF  ENGLAND 


BANKING 

THROUGH  THE 

AGES 


BY 


NOBLE  FOSTER  HOGGSON 


ILLUST  RATED 


NEW    YORK 

DODD,  MEAD  &  COMPANY 

1926 


5r 


VU<o 


COPYBIQHT,    1926 

By  NOBLE  FOSTER  HOGGSON 


First  Printing,  February,  1926 

Second  Printing,   February,   1926 

Third  Printing,  February,  1926 


THE  VAIL-BALLOU  PRESS 

BINGHAMTON   AND   NEW  YORK 


PREFACE 

Back  in  the  pre-historic  days  when  our  Aryan  fore- 
fathers roamed  the  plains,  and  when  a  cow  or  an  ox 
was  the  standard  medium  of  exchange,  the  crude  cat- 
tle pens  in  which  these  forerunners  of  our  modern 
currency  were  confined  became,  in  effect,  the  first 
banks.  Indeed,  our  own  word  "pecuniary"  is  derived 
from  the  Latin  word  pecus,  meaning  cattle. 

Between  those  primitive  cattle  pens  and  the  tower- 
ing citadels  of  modern  commerce  stretches  a  romantic 
story  that  epitomizes  the  upward  struggle,  not  of  a 
calling  alone,  nor  of  a  people  but  of  human  civi- 
lization itself.  For  the  pyramids  of  Egypt,  the 
temples  of  Greece,  the  Street  of  Janus  of  Rome,  the 
palaces  of  the  Medici,  all  repositories  of  treasure  and 
centres  of  financial  activity,  were  tokens  of  the  devel- 
opment of  the  artistic  impulses  and  ideals  of  the  na- 
tions, but  more  particularly  were  they  reflections  of 
the  trade,  the  commercial  relationships  and  the  inter- 
national amities  that  in  our  own  day  find  their  loftiest 
expressions  in  the  magnificent  structures  that  are  the 
outgrowth  of  the  needs  of  the  great  financial  institu- 
tions of  the  world. 

In  this  volume  the  author  gives  brief  but  illuminat- 
ing glimpses  of  the  progress  of  banking,  told  not  in 

[5] 


^7 


PREFACE 

the  academic  idiom  of  the  historian  but  in  the  informal 
and  casual  manner  of  the  banker  who  is  conscious  of 
the  spirit  of  romance  with  which  his  calling  is  imbued. 
That  the  story  of  banking  trails  back  into  the  dim 
mists  of  antiquity  everyone  knows.  But  the  fact  that 
this  story  is  replete  with  intense  human  interest,  with 
colourful  detail,  with  stirring  drama  and  with  a  sig- 
nificance to  civilization  so  profound  as  to  be  unparal- 
leled in  the  history  of  any  other  vocation,  comes  to 
us  with  a  shock  of  surprise.  Yet  wars  have  been  de- 
clared because  bankers  have  financed  them,  and  peace 
has  been  maintained  because  bankers  have  withheld 
aid,  and  kings  and  nations  and  peoples  have  fought 
and  won  and  lost  because  their  destinies  were  decided 
in  the  counting  rooms.  It  is  with  fragments  of 
such  a  history,  told  with  the  vision  of  a  poet  who, 
while  treating  of  the  details  of  his  narrative  is  yet  con- 
scious of  their  larger  significances,  that  this  informa- 
tive volume  deals. 


[6] 


FOREWORD 

The  world  tends  more  and  more  to  organize  itself 
on  a  business  basis.  The  underlying  principles 
which  govern  business  relationship  have  proved 
themselves  sound  and  abiding  while  political  and  so- 
cial systems  have  changed  from  age  to  age. 

Perhaps,  here  in  America,  the  breadth  and  zest  of 
our  business  enterprise  were  absorbed  from  the  stim- 
ulating freshness  men  found  in  the  New  World. 
But  the  tradition  and  structure  of  business  were  cer- 
tainly a  heritage  from  the  slow  and  painful  develop- 
ment of  the  Old  World. 

F.  S.  Chapin,  author  of  "Introduction  to  the  Study 
of  Social  Evolution/'  says:  "Probably  no  other  sin- 
gle force  in  human  history  has  been  more  important 
in  bringing  about  the  complete  transition  from  tribal 
to  civil  society  than  the  growth  of  commerce."  And 
this  growth  began  along  the  borders  of  the  Mediter- 
ranean basin  where  our  civilization  was  born.  How 
long  ago  may  be  judged  by  what  is  perhaps  the  oldest 
commercial  record  which  we  have  thus  far  traced.  It 
is  the  rock-graven  story  in  the  Valley  of  Hamma- 
mat,  Egypt,  describing  an  exhibition  sent  by 
Pharaoh  Sankh-ka-ra  to  trade  with  the  people  of 
the  "Land  of  Punt,"  which  was  possibly  the  Somali 

[7] 


FOREWORD 

coast  of  Africa  on  the  Gulf  of  Aden.  This  was  ap- 
proximately thirty-nine  hundred  years  ago  and  the 
commercial  organization  it  implies  must  have  long 
preceded  it. 

But  it  was  in  Babylonia,  rather  than  in  Egypt,  that 
business  first  developed  as  an  integral  factor  in 
the  lives  of  the  people.  Though  Egypt  was  the 
mother  of  most  of  the  industrial  arts,  the  people 
were  so  bound  to  the  land  and  intercourse  among 
them  was  so  restricted  that  commerce  as  the  fruit 
of  those  arts  never  fully  matured. 

In  the  Mesopotamian  valley,  on  the  other  hand, 
when  the  curtain  of  history  lifts,  we  encounter  an  eco- 
nomic organization  as  advanced,  in  many  ways,  as  it 
was  in  Elizabethan  England.  This  is  disclosed  in  the 
laws  of  Hammurabi,  promulgated  in  Babylon  2,000 
b.  c,  and  in  the  many  legal  and  business  documents 
from  the  period  of  this  great  king's  reign  which  have 
come  down  to  us  in  the  form  of  cuneiform  inscriptions 
on  baked  clay  tablets. 

These  records,  of  which  there  is  a  surprising  quan- 
tity, give  a  fairly  accurate  picture  of  what  must  have 
been  the  daily  life  of  the  community  at  that  time. 

The  prosperity  of  the  country  depended  on  the 
preservation  of  dikes  which  confined  the  waters  of  the 
Tigris  and  Euphrates  and  the  irrigating  canals  by 
which  the  life-giving  waters  were  distributed  through 

[8] 


FOREWORD 

the  fields.  A  strong  administration  naturally  kept 
up  these  important  works  while  a  weak  and  inefficient 
one  let  them  decay.  Because  the  king  was  thus  the 
key  to  the  prosperity  of  the  nation  he  came  to  control 
its  agriculture  and  finally  all  its  industries.  So,  issu- 
ing from  the  king,  there  were  laws  regulating  the  use 
of  irrigation  water,  the  rent  of  land,  grazing,  the 
wages  of  workmen,  the  business  of  the  commission 
men  or  agents,  debts,  interest  and  virtually  every- 
thing pertaining  to  the  economic  life  of  the  realm. 

Rent  was  fixed  at  about  six  bushels  of  wheat  an 
acre.  Interest  might  run  as  high  as  thirty-three  and 
one-third  per  cent.  Imprisonment  for  debt  and  sale 
into  slavery  were  legal,  but  at  the  end  of  the  fourth 
year  the  debtor  had  to  be  freed.  The  wages  of 
skilled  workmen  were  about  thirty-five  cents  a  month 
based  on  wheat  that  sold  for  seven  cents  a  bushel. 

There  were  many  slaves,  as  there  were  among  all 
conquering  peoples  of  antiquity,  but  side  by  side  with 
them  worked  free  farmers,  laborers  and  tradesmen 
who  were  permitted  within  legal  limits  to  exercise 
their  own  initiative,  to  undertake  business  ventures 
at  home  or  abroad  and  to  make  contracts  for  the 
future. 

These  undertakings  are  set  forth  and  described  in 
the  Babylonian  clay  tablets.  In  this  enduring  form 
our  archeologists  have  found  deeds  and  leases  of  land, 
wills  of  personal  and  other  property,  accounts,  notes, 

[9] 


FOREWORD 

mortgages,  receipts  for  storage,  agreements,  and  va- 
rious other  business  forms  which  must  be  considered 
the  progenitors  of  those  of  to-day. 

Neither  need  business  efficiency  be  regarded  as  a 
wholly  modern  development.  These  clay  records 
could  be,  and  were,  made  in  duplicate  by  the  simple 
process  of  pressing  wet  clay  over  a  tablet  which  was 
already  baked  and  then  baking  the  wet  impression. 
The  process  could,  of  course,  be  repeated  as  often  as 
desired,  or  at  least  until  the  original  impression  was 
blurred  in  transfer.  These  records  were  stored  in  the 
temples  or  courts  in  much  the  same  way  that  our  legal 
documents  are  at  present  kept  in  halls  of  record. 

This  general  economic  system  of  Babylon  was  the 
primal  influence,  in  fact,  the  direct  ancestor  of  the 
system  developed  by  Assyria  and  Persia,  as  well  as 
by  such  highly  important  commercial  states  as  Phoe- 
nicia and  Lydia.  The  bare  records  naturally  do  not 
fully  disclose  the  actual  practice  of  business  in  these 
remote  periods  but  we  know  that  it  resulted  in  great 
prosperity.  Here  and  there  particular  provinces  or 
cities  became  renowned  for  their  wealth  and  enor- 
mously rich  individuals  occasionally  appeared.  One 
man,  for  example,  is  said  to  have  entertained  the 
whole  of  Xerxes'  army. 

Directly  connected  with  these  prosperous  commer- 
cial nations  but  a  little  out  of  spiritual  touch  with  the 
development  of  their  civilizations,  were  the  Jews,  later 

[10] 


FOREWORD 

to  become  the  shrewdest  of  trading  peoples.  In  an- 
cient times  Palestine  was  essentially  an  agricultural 
community  and  for  that  reason  the  first  business  prin- 
ciples of  the  Jews  were  an  outgrowth  of  farming  or 
grazing. 

One  of  the  most  striking  of  their  legal  provisions 
was  that  land  could  not  be  sold  in  perpetuity,  though 
it  could  be  leased.  The  date  of  consummating  a  lease 
automatically  determined  its  length,  as  all  leases  ter- 
minated each  jubilee  year.  A  Hebrew  could  sell 
himself  or  his  children  into  slavery,  but  for  no  longer 
than  a  seven  year's  period.  It  was  also  compulsory 
to  settle  or  cancel  debts  at  the  end  of  a  seven  year's 
period.  Workmen's  wages  had  to  be  paid  at  the  end 
of  the  day  on  which  they  were  earned.  Interest  was 
not  only  illegal  but  was  forbidden  by  the  priest- 
hood, yet  it  was  permissible  to  take  it  from  for- 
eigners. This  provision  of  Old  Testament  law  was 
of  the  utmost  importance  in  that  it  became  the  basis 
of  the  pronouncements  of  the  mediaeval  Catholic 
Church  against  usury. 

Athens  was  superbly  situated  to  become  a  great 
commercial  centre  and,  driven  by  the  necessity  of  im- 
porting wheat  and  other  food  stuffs  for  her  growing 
population,  extended  her  trade  almost  to  the  ends  of 
the  then  known  world.  At  the  time  of  her  suprem- 
acy business  was  closely  controlled  by  the  govern- 
ment.    Details  of  administration  were  largely  en- 

en] 


FOREWORD 

trusted  to  commissions  and  there  were  innumerable 
commissioners.  Ten  market  commissioners  saw  to  it 
that  articles  offered  for  sale  were  wholesome  and 
priced  fairly  and  ten  other  commissioners  looked  after 
weights  and  measures.  Thirty-five  grain  commis- 
sioners, chosen  by  lot,  fixed  the  price  of  grain  in  the 
market,  insisted  that  the  millers  sell  their  meal  in 
proper  relation  to  the  price  of  grain,  and  that  the  bak- 
ers did  not  make  more  than  a  reasonable  profit.  Mer- 
chants in  the  seaports  tributary  to  Athens  were  com- 
pelled to  bring  to  the  market  two-thirds  of  the  grain 
imported  from  abroad.  Materially  speaking,  Athens 
was  one  of  the  great  cities  that  lived  by  bread  alone. 

While  private  trade  thrived  in  the  city,  Athens  and 
all  Greece  in  the  Fourth  Century  b.  c,  was  built  so- 
cially on  a  foundation  of  slave  labor.  As  against 
100,000  free  Athenians,  and  another  100,000  free  for- 
eigners resident  in  Athens,  there  were,  according  to 
Ctesicles,  400,000  slaves.  All  the  great  industries, 
such  as  silver  mining  and  the  manufacture  of  armor, 
depended  on  slave  labor.  Nicias  paid  their  masters 
an  obol  (about  three  cents  of  our  money)  a  day  for 
each  of  the  many  hundred  slaves  he  worked  in  the 
mines.  The  father  of  Demosthenes,  the  orator, 
owned  thirty-two  slave  sword  cutlers,  which  cost  him 
more  than  one  hundred  dollars  apiece  but  brought  him 
in  a  yearly  profit  of  six  hundred  dollars. 

Before  the  time  of  Solon  slavery  for  debt  among 

[12] 


FOREWORD 

the  citizenry  was  a  general  cause  of  complaint,  but  the 
great  law-giver,  according  to  Aristotle,  freed  these 
people  once  and  for  all  by  prohibiting  all  loans  on  the 
person  of  the  debtor. 

Rome  after  her  supremacy  presented  a  new  phe- 
nomenon in  the  business  world.  Before  the  Roman 
conquest  each  of  the  nations,  Persia,  Phoenicia, 
Egypt,  and  Carthage,  was  content  with  her  own  de- 
velopment and  without  regard  for  the  growth  and  ex- 
tension of  International  Commerce.  And  prior  to 
the  "pax  Romana,"  that  Roman  peace  of  almost  400 
years  which  spread  over  the  then  civilized  world,  the 
only  blending  of  international  interests  ever  at- 
tempted was  that  brief  conquest  of  the  east  by  Alex- 
ander of  Macedon  and  his  immediate  successors. 

In  early  Rome,  as  in  Greece,  slavery  for  debt  was 
permitted  under  the  law.  In  450  b.  c.  the  twelve 
tables  provided  that  a  debtor  might  have  thirty  days 
in  which  to  pay  after  a  judgment  had  been  rendered 
against  him,  but,  that  if  he  failed  to  settle,  his  person 
might  be  seized  by  his  creditors.  A  father  was  also 
permitted  to  sell  his  son  into  slavery  but  after  he  had 
done  so  three  times  the  son  was  released  from  pa- 
ternal control. 

Tacitus,  the  Roman  historian,  tells  us  that  the 
twelve  tables  limited  interest  to  one-twelfth  for  the 
lunar  year  or  ten  per  cent  for  the  solar  year  but  that 
this  regulation  was  constantly  evaded.     In  342  B.  c. 

[13] 


FOREWORD 

Roman  citizens  were  forbidden  to  accept  interest  at 
all  but  they  managed  to  continue  their  usurious  prac- 
tices by  arranging  loans  through  the  Latins  and 
dummies  of  other  Italian  states.  In  326  b.  a,  it  was 
made  unlawful  for  the  first  time  to  pledge  the  person 
of  a  freeman  for  debt.  This  statute,  Livy  declares, 
was  the  beginning  of  the  rise  of  the  plebes. 

Sheep  raising,  according  to  Cato,  was  the  most 
remunerative  industry  in  Rome  in  his  time,  and  led 
to  the  development  of  great  estates  as  well  as  the 
extension  of  the  slave  system. 

It  was  a  political  rather  than  a  business  system 
which  Rome  gave  the  people  of  antiquity.  At  no 
time  did  the  city  ever  become  a  great  exporting  centre, 
though  her  seaport,  Ostia,  where  grain  and  plunder 
were  brought  in,  hummed  with  activity.  Between 
300  and  146  b.  c.  Rome  slowly  conquered  the  Medi- 
terranean world  and  thus  opened  hitherto  undreamed 
of  avenues  of  wealth.  Riches  poured  in,  all  taxation 
within  the  city  ceased  and  the  populace  received  free 
grain. 

Naturally  the  most  direct  revenues  of  the  city  were 
the  spoils  of  conquest.  It  was  to  the  political  ad- 
vantage of  the  various  generals  to  send  home  the 
plunder  of  their  legions  and  this  slowly  became  a 
continuous  golden  stream.  A  second  source  of 
wealth  also  based  on  conquest  was  the  farming  of 
the  revenues.     The  taxes  to  be  collected  from  the 

[14] 


FOREWORD 

various  subject  provinces  were  discounted,  or  at  least 
bid  in  by  associations  of  tax  gatherers,  who  then  felt 
free  to  exact  all,  and  sometimes  more  than  the  amount 
they  were  legally  allowed  from  their  districts.  This 
profitable  business  fell  chiefly  into  the  hands  of  the 
knights  and  proved  to  be  the  beginning  of  their  rise 
to  power. 

A  third  source  of  wealth,  and  a  more  legitimate 
one,  was  likewise  based  on  conquest  and  naturally 
flowed  from  it.  Commerce  inevitably  followed  the 
sword.  As  Carthage  was  subdued  and  the  Mediter- 
ranean freed  from  pirates,  Roman  ships  swept  into 
the  Black  Sea  and  even  into  the  Atlantic  as  far  north 
as  England.  Overland  great  military  highways  were 
constructed  and  these  finally  became  the  roads  of 
commerce  which  were  rendered  comparatively  safe 
even  to  the  uttermost  rim  of  the  Empire. 

Vast  enterprises  in  time  forced  the  Romans  to 
look  more  kindly  on  the  charging  of  interest.  In 
88  b.  c.  interest  was  legally  fixed  at  one  per  cent 
a  month  and  in  50  b.  c.  this  rate  was  made  standard 
throughout  the  Empire.  In  Rome  itself,  however, 
trade  continued  to  languish.  Retail  business  chiefly 
in  the  hands  of  foreigners  and  freedmen  was  carried 
on  with  such  utter  lack  of  principle  that  Cicero 
sweepingly  condemned  such  merchandising  as  un- 
ethical and  unworthy  of  a  Roman's  attention.  Yet 
Cicero  did  not  condemn  commerce  as  a  whole,  ad- 

[15] 


FOREWORD 

mitting  that  it  might  even  be  honourable  if  conducted 
in  a  large  way  from  a  country  estate  and  without  too 
much  attention  to  sordid  detail.  It  is  not  of  record 
that  Cicero  ever  tried  to  conduct  a  successful  busi- 
ness on  this  basis. 

Senators  were  still  forbidden  to  enter  trade  but 
nevertheless  managed  to  do  so  through  the  agency  of 
freedmen  and  associations.  Thus  many  freedmen 
rose  to  wealth  under  the  Empire,  and  in  some  cases 
to  power.  The  government  continued  to  exercise 
a  benevolent  control  over  economic  affairs.  The  edict 
of  Diocletian  in  303  a.  d.  promulgated  a  long  list  of 
what  the  government  considered  reasonable  prices 
and  wages.  Though  it  probably  did  not  remain  long 
in  force  it  is  an  important  historical  document  and 
throws  a  sharp  light  on  the  economic  conditions  of 
that  period. 

But  the  authority  of  Rome  had  already  begun  to 
decay.  With  the  fall  of  the  Empire  the  roads  were 
destroyed,  pirates  again  infested  the  seas  and  foreign 
commerce  virtually  ceased.  Business  once  more  be- 
came local  and  confined  to  the  individual  town  or  dis- 
trict which  was  obliged  to  depend  largely  upon  its 
own  resources. 

So,  as  the  opportunity  for  enterprise  ceased,  the 
value  of  interest  became  obscured.  The  church,  re- 
viving the  old  Jewish  law,  forbade  any  interest  what- 
soever, though,  as  a  matter  of  fact,  certain  exceptions 

[16] 


FOREWORD 

were  made  in  practice.  The  crusades,  those  huge  en- 
terprises of  the  church,  were  financed  by  loans  against 
pledges,  but  not  at  interest. 

By  the  Twelfth  Century  the  guild  system  had  be- 
come well  established  and  for  the  next  four  or  five 
hundred  years  European  industry  was  organized  on 
that  basis.  If  a  tradesman  or  craftsman  needed  a 
little  money  he  could  borrow  it  from  his  guild  and 
occasionally  the  guild  entered  into  operations  on  be- 
half of  all  its  members.  Thus  business  was  again 
bestirring  itself  in  a  small  way. 

But  as  commerce  gradually  increased  in  the  Italian 
cities  and  the  Hanseatic  towns  of  Germany,  capital 
came  more  and  more  into  demand  because  it  could 
be  used  at  a  profit.  Loans  at  interest  once  more  be- 
came common,  though  they  were  usually  in  the  form 
of  discount  or  exchange.  Yet  it  was  not  until  after 
the  discovery  of  America  that  interest  was  legalized 
either  in  France  or  in  England.  Then  such  a  flood 
of  gold  and  silver  overflowed  into  the  Old  World  from 
the  mines  of  Mexico  and  Peru  that  business  was 
stimulated  to  a  degree  where  the  appreciation  of  the 
function  of  interest  was  completely  re-established.  A 
new  business  era  had  set  in. 

Through  all  this  vast  stretch  of  history  the  opera- 
tion of  banking  can  not  be  better  summarized  than 
by  H.  R.  F.  Bourne,  author  of  "Romance  of  Trade," 
who  says:     "The  banker's  calling  is  both  new  and 

[17] 


FOREWORD 

old.  As  a  distinct  branch  of  commerce  and  a  separate 
agent  in  the  advancement  of  civilization,  its  history 
scarcely  extends  over  300  years,  but  in  a  rude  and 
undeveloped  sort  of  way  it  has  existed  during  some 
dozens  of  centuries.  It  began  almost  with  the  be- 
ginning of  society."  To-day  it  is  the  foundation  on 
which  is  being  built  the  great  structure  of  modern 
civilization. 

Noble  Foster  Hoggson. 


[18] 


CONTENTS 

Foreword 7 

CHAPTEB  PAGE 

I  Early  Money  and  the  First  Coinage        .      .      .25 

II  Sacred  Safe  Deposit  Vaults  of  Ancient  Greece     33 

III  Banking  During  the  Roman  Era  of  Prosperity  .      39 

IV  Commercial  Development  of  the  Jews   ...     45 

V  Bankers  of  the  Venetian  Fleets 55 

VI     Renaissance   of   Banking  and  the  Bank  of  St. 

George 63 

VII     The  Florentine  Guild   and  the   Bank  of  the 

Medici 71 

VIII     Finances  of  Barcelona 81 

IX     Birth  of  the  English  National  Debt  and  Found- 
ing of  the  Bank  of  England 89 

X     The    Amsterdam    Bourse    in    the    Seventeenth 

Century 97 

XI     Rise  of  the  Rothschilds       . 103 

XII     Development  of  Banking  in  the  Land  of  the 

Vikings Ill 

XIII     Finances  of  the  French  Revolution  .      .      .      .119 


[19] 


ILLUSTRATIONS 

Granting  the   Charter   for   the   founding  of   the   Bank   of 

England Frontispiece 

FACING 
PAGE 

Bartering  in  Egypt  before  the  invention  of  money  ...  25 

An  ancient  Babylonian  record  in  baked  clay       ....  26 

Ancient  Egyptian  bracelets  used  as  money 28 

Some  of  the  earliest  discovered  coins        ......  30 

A  Greek  temple  used  in  ancient  times  as  a  depository  for 

valuables 33 

Banking  establishments   of  the   Roman   Republic    .      .      .41 

The  triumph  of  commerce  at  Ostia 43 

The  house  of  Aaron  of  Lincoln 46 

The  first  coined  shekels  of  the  Jews 50 

The  Bank  of  Venice 57 

One  of  the  first  Venetian  coins 60 

The  Palace  of  St.  George,  Genoa 63 

Genoese  bankers   in  conference 66 

Lorenzo   the   Magnificent 71 

Coat  of  Arms  of  the  Medici 72 

Loggia  del  Mercato   Nuovo 76 

Settlement  of  accounts  by  a  mediaeval  guild     .      .      .      .  82 

Mediaeval  coinage  of  Barcelona 84 

The  Royal  Mint,  a  portion  of  the  Tower  of  London       .      .  91 

English   officers   receiving   and   weighing  coin   at   the   Ex- 
chequer        .  94 

The  Amsterdam  Bourse 99 

The  Forum,  Amsterdam 100 

[21] 


ILLUSTRATIONS 

PACING! 
PAGE 

Nathan   Rothschild 103 

Coat  of  Arms  of  the  Rothschilds 104 

Coining  or  stamping  copper  money  in  Sweden  in  mediaeval 

times       . 114? 

Bourse.     Banking  headquarters  in  Stockholm     .      .      .      .116 

The  official  burning  of  the  Assignats 119 

One  of  the  Assignats 124 


[22] 


BANKING  THROUGH  THE  AGES 


ft 

o 

o 

h- 1 

H 

i— i 
H 

K 

H 

H 

O 

W 
pq 

H 
P4 

O 


BANKING  THROUGH 
THE  AGES 

CHAPTER  I 

EARLY  MONEY  AND  THE  FIRST  COINAGE 

AS  individuals  we  are  grateful  enough  when 
any  of  our  immediate  ancestors  leaves  us  a 
little  money  to  ameliorate  the  struggle  of  this 
complicated  modern  world  in  which  we  live.  Yet  we 
seldom  stop  to  consider  what  a  debt  of  gratitude  we 
owe  that  dim,  remote  ancestry  of  ours  which  slowly, 
after  much  puzzled  trial  and  error,  evolved  the  system 
of  money  on  which  our  whole  modern  world  is  based. 
Money  is  a  symbol.  It  stands  for  a  thing  offered 
or  a  thing  desired.  It  is  a  standard  of  value  in  con- 
venient form  and  therefore  a  medium  of  exchange. 
But  in  the  early  days  when  civilization  was  just  be- 
ginning to  crystallize  from  barbarism,  the  things 
themselves — cattle,  shaped  pottery,  weapons,  woven 
cloth  or  what  not — still  had  to  be  exchanged  directly. 
This  was  barter.  And  from  the  clumsiness  and  dif- 
ficulty of  barter,  a  clumsiness  and  difficulty  of  which 
we,  with  our  bills,  checks,  notes  and  ever  ready  change 

[25] 


BANKING  THROUGH  THE  AGES 

can  scarcely  conceive,  the  invention  of  money  natu- 
rally and  inevitably  developed. 

There  may  have  been  coined  money  at  an  un- 
suspectedly  early  date  among  the  peoples  of  the  sub- 
merged civilizations  of  antiquity  such  as  that  of  the 
Cretans,  which  flowered  at  Cnossos.  There  are  hints 
of  it  among  the  records  of  the  Sumerians  of  the  First 
Babylonian  Empire,  in  India,  and  in  the  half  legend- 
ary histories  of  early  China.  But  in  the  Seventh  or 
Eighth  Centuries  B.  c.  virtually  the  whole  trade  of 
the  ancient  world  centring  about  the  Mediterranean 
basin  was  being  conducted  through  barter,  and  the 
former  monetary  refinements  of  lost  empires,  if  they 
existed,  had  been  forgotten. 

Barter  exists  sporadically  in  the  world  to-day, 
as  among  the  Esquimaux  and  in  parts  of  Russia 
where  the  organization  of  society  has  broken  down. 
As  late  as  the  middle  of  the  last  century  the  British 
economist  Jevons,  at  one  time  assayer  of  the  Mint 
at  Sydney,  was  able  to  study  the  practice  in  its 
most  primitive  form.  He  cites  it  amusingly  to  illus- 
trate the  embarrassment  of  Wallace,  the  natural- 
ist, in  the  Malayan  archipelago* 

"In  some  of  the  islands,"  says  Jevons,  "where  there 
was  no  proper  currency,  Wallace  could  not  procure 
supplies  without  a  special  bargain  and  much  chaf- 
fering upon  each  occasion.     If  the  vendor  of  fish  or 

[26] 


AN    ANCIENT    BABYLONIAN    RECORD    IN    BAKED    CLAY 
BROKEN    TO    SHOW    THE    DUPLICATE 


EARLY  MONEY  AND  FIRST  COINAGE 

other  coveted  eatables  did  not  meet  with  the  sort  of 
exchange  desired  he  would  pass  on,  and  Mr.  Wallace 
and  his  party  had  to  go  without  dinner.  .  .  .  The 
first  difficulty  in  barter  is  to  find  two  persons  whose 
disposable  possessions  mutually  suit  each  other's 
wants.  There  may  be  people  wanting,  and  many 
possessing  the  things  wanted;  but  to  allow  of  an 
act  of  barter  there  must  be  a  double  coincidence, 
which  will  rarely  happen.  .  .  .  Sellers  and  purchas- 
ers can  only  be  made  to  fit  by  the  use  of  some  com- 
modity .  .  .  which  all  are  willing  to  receive  for  a 
time,  so  that  what  is  obtained  by  sale  in  one  case, 
may  be  used  in  purchase  in  another." 

Almost  everything,  at  one  time  or  another,  has 
been  used  as  this  commodity — wampum,  or  strung 
shells  among  our  own  Indians  and  the  primitive 
Chinese,  tobacco  by  our  early  colonists,  bottles  of 
trade  gin  in  West  Africa,  stamped  leather  among  the 
Carthaginians,  iron  among  the  Hittites  and  the 
British  Picts. 

But  no  matter  what  form  the  earliest  money  took, 
among  our  Aryan  forbears,  from  Dravidian  India 
through  Doric  Greece  to  pre-Roman  Italy,  it  was 
curiously  associated  with  cattle.  The  Aryans  were 
nomadic  or  grazing  peoples,  before  they  gatheiod  into 
cities,  with  great  herds  of  oxen,  cows,  and  sheep. 
Cattle  were  what  they  chiefly  had  to  barter  for  de- 

[27] 


BANKING  THROUGH  THE  AGES 

sired  luxuries,  and  so  cattle  became  the  customary, 
and  eventually  the  traditional,  standard  of  value. 
The  Latin  word  for  money,  pecunia,  is  derived  from 
pecus,  cattle. 

From  time  immemorial  in  India,  through  the  whole 
Vedic  Age  (2000  to  1400  b.  c.)  the  cow  was  the  chief 
standard  of  value  in  matters  of  barter.  As  the  cow 
is  thus  mentioned  in  the  Vedas  so  the  ox  appears  as  a 
unit  of  value  in  the  Homeric  poems.  When  the 
direct  transfer  of  oxen  was  not  convenient  or  desir- 
able among  the  Greeks  or  Trojans,  Homer  tells  us, 
a  weight  of  uncoined  gold  equivalent  in  value  to  an 
ox  was  fixed  and  called  a  "talent."  In  such  a  primi- 
tive society  wherever  precious  metals  were  used  as  a 
medium  of  exchange  they  were  regarded  as  mer- 
chandise— more  convenient  for  exchange  in  many 
cases,  but  not  in  themselves  measures  of  the  value  of 
other  commodities.  The  ox  talents,  gradually  com- 
ing more  into  use,  were  finally  coined  with  the  head 
of  an  ox  impressed  on  one  side,  and  came  to  be  called 
"oxen." 

It  was  usually  thus,  as  a  precious  metal,  that  money 
came  into  being.  Toward  the  end  of  the  Age  of  the 
Vedas  in  India  ornaments  for  the  neck  were  used  as 
money.  The  word  "nishka,"  which  originally  was 
merely  the  name  of  such  an  ornament,  gradually  ac- 
quired the  meaning  of  money.  In  some  passages  of 
the    Sanskrit   manuscripts   it   is   impossible   to   tell 

[28] 


EARLY  MONEY  AND  FIRST  COINAGE 

whether  a  neck  ornament  or  money  is  referred  to. 
The  nishka  appears  to  have  corresponded  to  the  cop- 
per anklets  or  bracelets  used  by  the  Egyptians  of  the 
Seventeenth  Dynasty  (1600  B.C.)  as  a  medium  of 
exchange. 

In  the  Indian  Epic  period  (1400  to  800  b.  c.)  the 
word  "nishka"  had  definitely  come  to  mean  a  gold 
piece;  and  a  silver  "karshapana,"  or  coin,  is  men- 
tioned in  various  Buddhist  works.  Somewhat  later, 
metal  pieces  begin  to  appear,  marked  to  show  their 
weight  and  hence  their  value.  These  copper  coins, 
which  were  the  basis  of  value  in  India  in  the  Seventh 
Century  b.  c,  weighed  about  150  grains  and  show  by 
their  punch  marks  that  they  were  struck,  not  by  the 
government,  but  by  private  individuals. 

There  were  also  silver  coins  in  India,  oblong  or 
square  in  shape,  and  apparently  cut  from  strips  of 
metal.  They  were  without  inscription  except  for  the 
rough  outlines  of  natural  objects  such  as  the  sun,  a 
man,  or  a  tree,  which  perhaps  sufficed  to  identify  the 
person  who  issued  them.  From  their  shape,  no 
doubt,  the  writers  of  South  India  called  these  coins 
"salakas"  or  dominoes. 

Money  in  Egypt  evolved  in  much  the  same  way. 
As  late  as  the  New  Kingdom,  which  dates  from  1600 
B.  c,  there  was  no  coined  money.  Up  to  that  time 
the  value  of  commodities,  for  purposes  of  exchange, 
had  been  stated  in  weights  of  copper. 

[29] 


BANKING  THROUGH  THE  AGES 

The  copper  anklet,  previously  mentioned  in  con- 
nection with  the  Indian  nishka,  weighed  a  "deben" 
and  was  worth  about  five  cents  in  our  money.  A 
deben  of  silver  was  valued  at  about  $4.00.  A  com- 
mon price  for  an  ox  was  120  debens  of  copper,  or 
$6.00 ;  while  a  bushel  of  wheat  sold  for  approximately 
two  copper  debens,  or  ten  cents. 

The  first  actual  coins  in  Egypt  seem  to  have  come 
from  the  iEgean  Islands,  perhaps  through  Minoan 
traders.  The  first  coins  struck  within  Egypt  itself 
were  the  silver  coins  made  by  the  Persian  conquerors 
of  Egypt  (525  B.C.),  bearing  an  owl  and  flail  de- 
sign. 

One  other  interesting  monetary  development  in  the 
ancient  world  precedes  the  period  of  definite  histor- 
ical coinage — the  silver  units  used  by  the  Babylonians, 
and  probably  adopted  by  them  from  an  earlier 
Sumerian  people  who  had  already  established  a 
flourishing  civilization  around  the  upper  waters  of  the 
Persian  Gulf.  Here  the  lowest  unit  was  a  grain  of 
silver,  which  weighed  about  as  much  as  a  grain  of 
barley.  One  hundred  and  eighty  such  grains  made 
an  ordinary  shekel  and  360  grains  constituted  a  great 
shekel.  Sixty  shekels  made  a  "maneh,"  and  sixty 
"manehs"  a  talent.  These  units  suggest  the  division 
of  the  circle  into  360  degrees  and  of  time  into  hours 
and  minutes,  both  contributions  of  Chaldean  or  Su- 
merian astronomical  science  to  our  heritage  of  culture. 

[80] 


God  Coin 
Persia 


Crab  of  Cos 
Asia 


Lion's  Head  of  Lydia 
Asia 


Wheel  of  Chalcis 
Greece 


SOME    OF    THE    EARLIEST    DISCOVERED    COINS 
SEVENTH    CENTURY,    B.C. 


EARLY  MONEY  AND  FIRST  COINAGE 

The  elaborate  mathematical  system  of  the  Sumerians 
progressed  by  twelves  instead  of  tens,  and  this  system 
is  imbedded  in  many  of  our  conceptions  to-day, 
especially  those  involving  the  division  of  time. 

As  early  as  the  ascendency  of  the  Babylonians 
there  is  mention  of  silver  being  stamped  with  the 
image  of  some  god  or  temple — a  device  like  the  later 
one  of  the  Greeks  who  used  "Temple"  as  well  as 
other  coins.  Despite  such  official  impressions,  how- 
ever, the  metal  coins  passed  by  weight  and  not  by 
fixed  value — in  a  word,  they  were  still  merchandise. 
In  time  various  shekel  pieces  came  to  be  cast  in  half 
shekel,  shekel  and  five  shekel  pieces — representing 
probably  the  first  uniform  coinage. 

That  cast  money  was  being  coined  by  the  state 
in  Nineveh  may  be  gathered  from  graven  records 
of  the  Assyrian  Sennacherib,  who  thus  describes 
the  casting  of  huge  winged  lions  for  the  palace: 

"According  to  the  commands  of  the  god,  I  fashioned 
molds  of  clay,  and  poured  the  bronze  as  easily  as 
though  I  iwere  casting  half  shekel  pieces." 

This  date,  about  690  B.  c,  perhaps  fixes  the  be- 
ginning of  real  coinage,  though  Gyges  of  Lydia, 
whose  reign  was  synchronous  with  that  of  Senna- 
cherib's successor,  Esarhaddon,  is  generally  credited 
with  having  issued  the  first  coins.     Herodotus,  in 

[31] 


BANKING  THROUGH  THE  AGES 

Book  I,  says:  "The  Lydians  are  the  first  of  all  na- 
tions that  we  know  of  that  introduced  the  art  of  coin- 
ing gold  and  silver." 

In  China  the  earliest  tokens  seem  to  have  retained 
in  their  very  shape  the  idea  of  the  barter  from  which 
they  originated.  Those  of  the  state  of  Chi  (1122  to 
224  b.  c. )  were  in  the  form  of  knives,  spades,  axes, 
bells  and  other  familiar  objects,  suggesting  that  the 
knife  piece  was  of  the  value  of  a  knife,  the  spade 
piece  of  a  spade,  and  so  on.  The  knife  tokens  were 
all  pierced  for  stringing,  as  were  the  shells  used  in 
the  earliest  dawn  of  Chinese  history.  Round  cast 
coins,  perforated  with  a  square  hole  in  the  middle, 
were  introduced  in  the  Chow  Dynasty,  about  600  b.  c, 
but  they  were  still  inscribed  as  "equal  to  one  axe," 
one  spade,  one  gong,  or  one  knife.  Perforation  is 
still  a  familiar  attribute  of  Chinese  coins. 

Thus,  through  the  ages  and  in  all  countries  which 
developed  a  civilization,  money  of  a  sort  struggled 
into  existence.  With  the  development  of  the  art  of 
casting,  coinage  passed  from  its  primitive  form  into 
something  similiar  to  that  which  we  use  to-day. 


[32] 


A   GREEK    TEMPLE    USED   IN   ANCIENT    TIMES    AS   A 
DEPOSITORY    FOR    VALUABLES 

The  proportions  and  details  of  this  building  have  been  used  as  an 
inspiration  in   designing  many  modern  bank  buildings. 


I 


CHAPTER  II 

SACRED  SAFE  DEPOSIT  VAULTS 
OF  ANCIENT  GREECE 

'TfF  a  man  gives  to  another  silver,  gold,  or  anything 
else  to  safeguard,  whatsoever  he  gives  he  shall 
show  to  witnesses,  and  he  shall  arrange  the  con- 
tracts before  he  makes  the  deposits."  So  ran  the 
statutes  of  Hammurabi  as  early  as  2000  b.  c.  Thus 
twenty  centuries  before  the  Christian  era  we  find  the 
Babylonians  placing  their  treasure  for  safe-keeping 
with  trusted  men,  to  whom  they  paid  as  much  as  one- 
sixtieth  of  the  treasure  for  that  service. 

It  is  true  that  the  Egyptians  had  what  might  be 
looked  upon  as  treasure  houses  long  before  this,  and 
even  the  Pyramids  might  be  considered  safe  deposit 
vaults,  for  in  the  belief  that  the  soul  would  live  as 
long  as  the  mummy  remained  intact,  the  wealthy 
Egyptian  planned  for  the  safe-keeping  of  his  mummy 
with  more  concern  than  for  the  most  precious  of  his 
possessions.  With  this  very  personal  and  distinctly 
mortuary  attitude  prevailing  along  the  Nile,  it  is  not 
surprising  that  we  are  obliged  to  leave  this  river  in 
favour  of  the  Euphrates  to  find  a  practical  conception 
of  trust  responsibilities. 

[33] 


BANKING  THROUGH  THE  AGES 

From  Greece,  however,  came  the  real  inspiration 
for  the  safe  deposit  department  as  we  know  it  to-day. 
Unlike  Egypt  and  Babylonia,  both  blessed  with 
strong  central  governments,  Greece  was  divided  into 
many  practically  independent  states  and  cities  which 
were  usually  at  war  with  one  another  or  with  foreign 
powers.  When  not  at  war  they  were  in  a  constant 
state  of  unrest  through  the  activities  of  opposing 
political  factions. 

By  sad  experience,  or  perhaps  by  happy  accident, 
the  Greeks  discovered  in  the  Temple  the  only  safe 
depository  which  the  turbulent  times  afforded,  and 
which  usually  remained  inviolate.  The  strong  re- 
ligious principles  of  the  educated  classes,  as  well  as 
the  superstitions  and  fears  of  the  unscrupulous  and 
non-believers,  combined  to  create  about  the  Temple 
an  atmosphere  of  greater  security  than  could  have 
been  attained  by  any  mechanical  devices  then  known. 

To  the  Temples  of  Greece,  therefore,  one  may  look 
for  the  first  real  safe  deposit  vaults  as  well  as  for  the 
beginnings  of  the  functions  of  our  banks  of  domestic 
and  foreign  commerce.  On  behalf  of  timid  or  absent 
owners,  the  priests  of  the  Temples  received  money, 
precious  stones,  silver  and  gold  plate,  jewelry,  im- 
portant documents,  and  practically  every  other  form 
of  valuables. 

For  the  safeguarding  of  treasure  there  were  at  first 
no  standard  charges  made  by  the  Temple  banks,  but 

[34] 


DEPOSIT  VAULTS  OF  ANCIENT  GREECE 

records  show  that  the  obliging  priests  received  liberal 
presents  for  their  conscientious  services.  Later  when 
the  Temples  safeguarded  valuables  as  a  matter  of 
business,  they  made  regular  and  substantial  charges 
and  the  records  indicate  that  they  also  lent  their  own 
funds  at  interest. 

In  the  history  of  some  of  the  more  important  Tem- 
ples in  which  the  handling  of  treasure  grew  into 
an  important  activity,  one  may  trace  many  of  the 
functions  of  our  modern  bank.  In  the  Parthenon, 
for  example,  and  at  Corinth,  a  special  chamber  called 
the  "Opisthodomus"  was  partitioned  off  as  a  storage 
vault  for  gold  and  silver  belonging  to  the  Temple  it- 
self and  for  valuables  deposited  by  the  worshippers. 
In  some  Temples  without  such  treasure  rooms,  a  por- 
tion of  the  portico  was  screened  off  from  the  central 
passage  for  use  as  a  combination  safety-vault  and 
museum. 

With  private  bankers  as  with  the  smaller  Temples 
where  there  was  no  equipment  for  the  proper  and 
safe  storage  of  deposited  treasure,  such  as  separate 
vaults  or  individual  boxes,  many  mistakes  were  made 
resulting  in  claims  which  had  to  be  settled  by  the 
courts.  A  typical  case  is  that  of  a  Greek  named 
Timosthenes  who  left  some  valuable  cups  with  the 
best  known  banker  of  Athens,  a  foreigner  named 
Pasion.  The  banker  loaned  the  cups  to  a  relative  to 
be  used  at  a  banquet  and  they  were  never  returned. 

[35]' 


BANKING  THROUGH  THE  AGES 

The  case  was  brought  into  court  to  settle  the  value 
of  the  cups,  and  Timosthenes  was  indemnified. 

Inventories  of  the  Parthenon  incised  on  marble 
tablets  show  that  its  storeroom  was  equipped  with 
shelves  and  cupboards;  various  objects  are  listed  as 
being  on  the  first,  second  or  third  shelf  or  in  a  certain 
cupboard. 

When  the  richer  Temples  at  Delphi  and  Olympia 
became  overcrowded  with  gold  and  silver  and  other 
valuables,  small  treasure  houses  were  built  within  the 
sacred  precincts  to  accommodate  the  overflow.  Rows 
of  these  at  Olympia,  described  by  Pausanias,  the 
Greek  traveler,  were  designed  like  miniature  Tem- 
ples. 

Although  superstition  and  religious  veneration 
kept  these  structures  safe  from  ordinary  robbers  and 
sometimes  even  from  raids  during  violent  revolutions, 
ambitious  conquerors  and  wilful  tyrants,  now  and 
then,  swept  aside  all  such  scruples  and  appropriated 
the  treasures  for  their  own  aggrandizement.  The 
Persians  during  the  invasion  of  Xerxes  felt  no  qualms 
about  the  sacking  of  the  great  Temple  at  Delphi.  As 
a  matter  of  desperate  necessity  it  was  again  looted  by 
the  Phocians  about  350  b.  c.  While  Dionysius  the 
elder  (430  b.  c-367  b.  c.)  of  Syracuse  was  carrying 
out  his  operations  against  the  Carthaginians,  he 
seized  from  the  Temples  of  Syracuse  golden  mantels, 
golden  vases,   crowns,    silver   tables,   and   even  the 

[36] 


DEPOSIT  VAULTS  OF  ANCIENT  GREECE 

golden  beard  of  Esculapitjs,  and  having  found  this 
method  of  securing  funds  for  his  campaigns  success- 
ful, carried  the  practice  into  other  lands,  even  allying 
himself  with  the  Illyrians  for  the  express  purpose  of 
plundering  the  Temple  of  Delphi,  in  which  enter- 
prise, however,  he  was  defeated  by  the  Greek  troops. 

With  the  Temple  at  Agylla  he  was  more  successful, 
relieving  the  Etrurians  of  treasure  valued  at  1000 
talents,  or  about  one  million  dollars.  Sailing  back 
from  one  of  these  raids  before  exceptionally  favour- 
able winds,  the  graceless  plunderer  cynically  re- 
marked to  his  friends,  "You  see  how  the  Greek  gods 
favour  sacrilege." 

In  those  hardy  days,  even  if  at  intervals  some  ruth- 
less Dionysius  resorted  to  plunder,  the  rights  of  prop- 
erty were  beginning  to  be  respected  and  many  phases 
of  the  banking  business  were  established  on  solid 
foundations.  Nevertheless,  despite  the  atmosphere 
of  religious  awe  which  surrounded  the  Greek  Tem- 
ples and  tended  to  keep  them  inviolate,  these  treasure 
houses  of  the  Hellenes  were  by  no  means  as  efficient 
and  secure  as  the  average  safe  deposit  vault  of  to- 
day. 


[37] 


M 


**TV  yfTONEY  is  indeed  the  most  important  thing 
in  the  world;  and  all  sound  and  success- 
ful personal  and  national  morality  should  have 
this  fact  for  its  basis/' 

Geo.  Bernard  Shaw. 


CHAPTER  III 

BANKING  DURING  THE  ROMAN  ERA  OF 
PROSPERITY 

IMPRESSIVE,  indeed,  and  vividly  suggestive  of 
the  economic  life  of  the  ancients,  are  the  ruins 
which  remain  of  what  were  once  the  banking 
establishments  of  the  Roman  Republic.  These  of- 
fices were  situated  in  a  row  along  the  north  side  of 
the  Forum  on  the  street  of  Janus,  the  Wall  Street 
of  the  time.  This  locality  named  after  the  double- 
faced  God,  Janus,  is  known  to  have  been  frequented 
by  bankers  and  money-changers  from  the  fourth  cen- 
tury b.  c,  although  the  present  ruins  are  of  buildings 
which  date  from  a  period  two  hundred  years  later  at 
about  which  time  they  were  destroyed  by  fire.  When 
reconstructed  they  were  amalgamated  into  The 
Basilica  Aunilia,  the  new  courthouse  built  by  Lucius 
Aeurilius  Paulus,  overlooking  the  public  square. 

The  offices  were  distinguished  by  numbers  on  the 
pillars  of  the  portico  outside.  There  is  a  reference 
to  one  of  them  in  the  works  of  Catullus. 

Our  sense  of  the  actuality  of  ancient  civilizations 
is,  perhaps,  never  stirred  so  strongly  as  when  we  look 
upon  the  scenes  of  their  every-day  transactions.     The 

[39] 


BANKING  THROUGH  THE  AGES 

Parthenon  and  the  Coliseum  fail  to  give  us  that  feel- 
ing of  intimacy  with  the  Greeks  and  the  Romans 
which  we  enjoy  when  we  see  what  is  left  of  the  less 
pretentious  buildings  in  which  the  ordinary  business 
of  the  day  was  carried  on. 

The  well-worn  marble  floors  of  these  rediscovered 
offices  were  found  covered  with  loose  coins  which  must 
have  been  scattered  at  the  time  of  a  great  fire,  as 
many  coins  have  been  melted  and  welded  together 
and  cemented  to  the  slabs  of  the  pavement. 

An  ancient  bank  consisted  of  a  large,  solidly  con- 
structed, though  sparsely  furnished  and  badly  lighted 
apartment  in  which  the  money-changer  sat  on  a  high 
stool  with  his  coins  spread  out  before  him  behind  a 
bronze  mesh  screen.  His  clients  entered  from  the 
portico  in  front ;  now  a  lawyer  to  deposit  the  fee  won 
in  the  Forum  across  the  way ;  now  a  young  patrician 
on  his  way  to  the  circus,  comes  to  draw  a  thousand 
resteatii  to  bet  on  his  favourite  gladiator ;  now  a  Thes- 
salian  slave  to  add  a  little  to  the  growing  sum  with 
which  he  hoped  to  purchase  his  freedom. 

An  American  bank  teller  would  speedily  have  felt 
at  home  in  these  surroundings.  We  are  apt  to  think  of 
Roman  bankers  merely  as  money-changers,  forgetting 
that  the  broad  and  complicated  commerce  of  Rome 
required  a  banking  system  of  nearly  as  high  a  de- 
velopment as  our  own.  A  part  of  an  ancient  banker's 
daily  routine  included  the  opening  of  accounts,  the 

[40] 


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BANKING  DURING  ROMAN  ERA 

receipt  of  deposits,  the  issuing  of  bills  of  exchange, 
the  furnishing  of  letters  of  credit,  the  making  of  loans, 
the  purchase  of  mortgages ;  in  fact  most  of  the  trans- 
actions performed  by  a  bank  cashier  of  to-day  and  his 
assistants.  Interest  was  paid  on  time  deposits,  such 
deposits  being  termed  credits  as  distinguished  from 
those  which  were  subject  to  call,  and  on  which  no 
interest  was  paid.  The  sanctioned  rates  of  interest 
were,  at  first,  high,  but  decreased  in  the  last  days  of 
the  Republic  until,  under  the  Empire,  they  were  close 
to  the  modern  rates,  two  and  a  half  per  cent  being 
once  recorded. 

Judging  by  the  extensive  and  varied  facilities  of- 
fered to  Roman  citizens  for  the  safe  keeping  and  the 
safe  investment  of  the  sums  of  money  which  consti- 
tuted the  surplus  of  their  yearly  balances  and  savings, 
it  is  evident  that  thrift  as  well  as  profitable  investment 
were  practiced  and  encouraged. 

Although  we  have  no  evidence  as  to  the  existence 
of  regular  savings  banks,  we  know  that  money  could 
be  put  at  interest  or  laid  by  for  future  emergencies  in 
three  ways:  First,  by  entrusting  it  to  bankers; 
second,  by  placing  it  in  the  care  of  priests ;  and  third, 
by  depositing  it  in  safes  guarded  by  the  State.  In 
the  first  case,  which  was  to  save  the  depositor  the 
trouble  and  danger  of  keeping  the  money  and  making 
payments  from  his  home,  the  banker  received  the  de- 
posit but  paid  no  interest.     He  simply  honoured  the 

[41] 


BANKING  THROUGH  THE  AGES 

checks  of  the  client  as  long  as  there  was  a  balance  in 
his  favour;  but  when  the  money  was  deposited  as  a 
creditum,  that  is,  for  a  specified  period  of  time,  at 
interest,  the  banker  was  allowed  to  use  and  invest  it 
to  the  best  of  his  judgment. 

Ample  facilities  were  furnished  by  the  State  for 
the  safe-keeping  of  money  and  other  valuables. 
Public  repositories  were  maintained  by  the  govern- 
ment in  which  the  citizens  were  given  the  use  of 
guarded  safe  deposit  vaults.  The  ruins  of  the  build- 
ings used  for  this  purpose,  some  of  which  are  of  vast 
extent,  give  a  very  definite  idea  of  the  solidity  of  the 
Roman  economic  system  and  the  secure  and  firm 
foundation  upon  which  its  wealth  was  founded. 

The  true  foundation  of  Roman  prosperity  was, 
however,  the  independence  and  self-sufficiency  of  the 
Roman  citizen,  and,  when  these  were  corrupted  and 
destroyed,  the  whole  superstructure  was  undermined. 
When  the  emperors  converted  the  repositories  of  the 
Republic  into  storehouses  for  the  keeping  of  grain  to 
be  doled  out  to  the  mobs  instead  of  providing  them 
with  work  from  which  they  could  earn  sufficient  to 
meet  their  necessities,  then  the  overthrow  of  Roman 
rule  and  prosperity  was  imminent.  Partem  et  cir- 
ceuses  were  the  forerunners  of  their  downfall. 

To  a  considerable  extent  the  success  of  Rome 
sprang  from  an  essential  quality  which  was  the  thor- 
ough and  enduring  manner  in  which  details  were 

[42] 


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BANKING  DURING  ROMAN  ERA 

worked  out.  The  truth  of  this  is  strikingly  apparent 
when  we  study  such  relics  of  Roman  greatness  as  we 
have  been  discussing.  It  savours  of  triteness  to  say 
that  the  Romans  built  for  eternity,  yet  the  words  are 
expressive.  The  utmost  care  was  given  the  smallest 
detail,  and  construction  of  a  superficial  nature  was 
scornfully  avoided,  whether  in  the  building  of  a  public 
repository  or  the  organization  of  a  department  of 
the  government. 


[43] 


**TV  ill*  ONE  Y  which  represents  the  prose  of  life, 
JkV  JL   an^  which  is  hardly  spoken  of  in  the 
parlors  without  an  apology,  is  in  its  effects  and 
laws  as  beautiful  as  roses." 

Emerson. 


CHAPTER  IV 

COMMERCIAL  DEVELOPMENT  OF 
THE  JEWS 


w 


'E  are  accustomed  to-day  to  regard  the 
Jews  as  a  great  commercial  people  with  a 
special  aptitude  for  banking,  finance  and 
business  of  all  sorts.  But  this  direction  of  their 
genius  was  forced  on  them  by  their  evolutionary  en- 
vironment as  a  homeless  and  oppressed  race. 

Until  they  were  driven  from  their  homeland  the 
Jews  were  probably  the  least  commercial  people  of 
civilized  antiquity,  though  they  were  surrounded  on 
all  sides  by  other  Semitic  races  who  had  developed 
business  as  a  fine  art.  The  Jews,  however,  in  the  be- 
ginning, were  nomads  who,  after  settling  down  in  the 
Land  of  Canaan,  devoted  themselves  to  agriculture 
in  the  intervals  between  their  rather  unsuccessful 
wars  with  the  original  land-holders,  the  Canaanites, 
on  the  north,  and  the  Philistines,  on  the  south.  The 
Philistines,  who  do  not  appear  in  the  earlier  stories 
of  the  Jews,  seem  to  have  been  a  Mediterranean  peo- 
ple who  were  driven  into  Palestine  when  Cnossus, 
in  Crete,  was  destroyed,  1000  b.  c. 

The  second  reference  to  money  in  the  Bible  de- 

[45] 


BANKING  THROUGH  THE  AGES 

scribes  a  real  estate  transaction  in  which  the  Jews 
clearly  enough  appear  as  nomads,  or  tent  people,  and 
the  Canaanites  as  town-dwellers.  The  thirty-third 
chapter  of  Genesis  tells  how  Jacob  came  to  "Shalem, 
a  city  of  Shechem". 

"And  he  bought  a  parcel  of  a  field  where  he  had 
spread  his  tent  at  the  hand  of  Hamor,  Shechem's  fa- 
ther, for  an  hundred  pieces  of  money.' ' 

This  was  undoubtedly  the  currency  of  another  race 
for,  until  the  second  century  b.  c,  the  Jews  continued 
to  weigh  out  gold  and  silver  as  payment  for  mer- 
chandise or  used  the  money  current  in  Syria,  Persia, 
Phoenicia,  Athens,  and  the  cities  of  the  Seleucidae. 
Simon,  the  Maccabee,  is  said  to  have  been  the  first  to 
issue  the  shekel  as  a  coin. 

But  this  is  late  in  the  story  of  Israel.  Por  many 
centuries  the  Jews  were  neither  craftsmen  nor  trad- 
ers. In  I  Samuel,  Chapter  13,  it  is  stated:  "There 
was  no  smith  throughout  all  the  land  of  Israel.  .  .  . 
But  all  the  Israelites  went  down  to  the  Philistines  to 
sharpen  every  man  his  share  and  his  coulter."  Hence 
it  would  seem  that  they  had  not  even  learned  the 
rudiments  of  metal  working. 

Under  their  third  king,  Solomon,  the  Jews  enjoyed 
a  brief  burst  of  glory,  which  has  become  a  tradition  of 
great  grandeur,  though  compared  to  the  magnificence 
of  other  potentates  of  his  time  it  was  very  limited  in- 
deed.    Solomon's  reign  may  be  set  down  as  some- 

[46] 


THE    HOUSE    OF    AARON    OF    LINCOLN,    AT    LINCOLN, 
ENGLAND TWELFTH    CENTURY 


COMMERCIAL  DEVELOPMENT  OF  JEWS 

where  around  960  b.  c.  and  its  success  seems  to  have 
been  largely  due  to  his  alliance  with  the  Phoenicians. 
This  advanced  people  supplied  the  Jews  with  what 
they  lacked,  taught  them  the  ways  of  craftsmanship 
and  commerce,  and  thoroughly  exploited  their  king- 
dom as  a  highway  for  trade  with  nations  beyond  the 
Red  Sea. 

When  Solomon  decided  to  build  his  temple  he  im- 
ported Hiram,  the  worker  in  brass,  from  Tyre,  to 
make  the  brazen  vessels  and  decorations  used  in  his 
famous  monument.  In  fact  the  whole  impetus 
toward  a  wider  civilization  among  the  Jews  at  this 
time  seems  to  have  come  from  the  Kingdom  of  the 
Phoenicians.  We  are  told  in  I  Kings,  Chapter  9, 
how  Solomon  constructed  a  navy  of  ships  and  sent 
them  to  Ophir.  But  this  navy,  beside  the  servants 
of  Solomon,  was  manned  by  "shipmen  that  had 
knowledge  of  the  sea"  sent  by  Hiram,  King  of  Tyre. 
Obviously  the  Jews  had  no  previous  maritime  ex- 
perience. 

Precious  metals  were  also  imported  into  Israel. 
King  Hiram  sent  Solomon  six  score  talents  of  gold, 
together  with  the  timber  and  metal  for  the  temple 
and  was  repaid  by  the  cession  of  twenty  cities  to- 
gether with  great  quantities  of  wheat  and  oil.  In 
the  Jewish  fleet  which  the  Phoenicians  manned,  Sol- 
omon was  later  able  to  bring  gold  to  the  amount  of 
420  talents   from   Ophir.     Though  gold   was   thus 

[47] 


BANKING  THROUGH  THE  AGES 

brought  in  there  was  no  coinage  in  general  use  until 
after  the  overthrow  of  Jerusalem  by  the  Assyrians. 

Indeed,  the  laws  of  the  Jews  were  wholly  unfa- 
vourable to  the  financing  of  trade  or  the  development 
of  banking. 

In  Exodus,  Chapter  12,  stands  the  injunction: 
"If  thou  lend  money  to  any  of  my  people  that  is  poor 
by  thee,  thou  shalt  not  be  to  him  an  usurer,  neither 
shalt  thou  lay  upon  him  usury."  In  Leviticus, 
Chapter  25,  is  found  a  similar  command:  "Thou 
shalt  not  give  him  the  money  upon  usury,  nor  lend 
him  thy  victuals  for  increase." 

Such  biblical  rules  as  these  virtually  kept  the  Jews 
from  banking  throughout  the  early  ages  and  exer- 
cised a  tremendous  influence  upon  the  development 
of  banking  in  the  Middle  Ages.  Yet  the  Israelites 
were  crowded  in  between  the  Assyrians  and  other 
peoples  of  western  Asia,  all  of  whom  had  legalized 
the  use  of  interest  from  time  immemorial.  It  is  pos- 
sible for  this  reason  that  in  Deuteronomy,  Chapter 
23,  it  is  expressly  declared  that  "Unto  a  stranger 
thou  mayest  lend  upon  usury." 

This  permission  was  the  foundation  upon  which 
Jewish  banking  developed  many  centuries  later.  In 
fact  the  restrictions  against  usury  may  have  some- 
what broken  down  even  as  early  as  the  Roman  occu- 
pation, during  the  life  of  Christ,  for  in  the  parable  of 
the   unfaithful   servant    (Luke,    14)    we   find   this 

[48] 


COMMERCIAL  DEVELOPMENT  OF  JEWS 

question:  " Wherefore,  then,  gavest  thou  not  my 
money  into  the  bank  that  at  my  coming  I  might  have 
required  mine  own  with  usury?"  It  was  a  time  of 
the  violation  of  tradition.  The  Herodian  family, 
ignoring  the  injunction  against  graven  images,  was 
issuing  a  coinage  adorned  with  the  representation  of 
living  things. 

Many  Jews  had  begun  to  leave  Palestine.  In 
Alexandria,  during  the  reign  of  the  Ptolemies,  there 
were  more  Hebrews  than  there  were  in  Jerusalem 
itself.  And  after  the  fall  of  Jerusalem,  of  course, 
they  were  scattered  throughout  the  territory  of  the 
Roman  Empire.  It  is  then  that  they  began  to  de- 
velop tendencies  toward  trade  and  commerce  as  well 
as  toward  philosophy,  medicine  and  such  other  sci- 
ences as  then  existed.  Under  the  Roman  Emperors 
the  Jews,  with  certain  exceptions,  were  compelled  to 
reside  in  restricted  areas.  Thus,  not  having  access 
to  the  land,  they  were  obliged  to  turn  to  trade. 

Under  the  laws  of  the  Roman  Empire  interest  was 
legal  at  one  per  cent  a  month.  As  the  Jews  were 
expressly  permitted  by  their  own  laws  to  take  interest 
from  non-Jews  the  field  of  money  lending  was  left 
open  to  them  and  they  gradually  began  to  specialize 
in  it. 

When  the  Mohammedans  swept  over  northern 
Africa  and  Spain  the  Jews  found  themselves  in  the 
midst  of  a  people  whose  religious  authorities  frowned 

[49] 


BANKING  THROUGH  THE  AGES 

upon  interest.  Among  these  also  the  Jews  gradually 
entered  the  money  lending  business,  though  at  first 
rather  timidly  and  in  a  small  way.  There  are  ref- 
erences to  their  operations  in  Alexandria  in  the  Sev- 
enth Century,  and  in  Spain  soon  after  the  Moorish 
conquest  in  the  Eighth  Century. 

Among  the  Christian  countries  France,  under 
Charlemagne,  was  a  haven  for  the  Jews.  Char- 
lemagne, that  great  liberal,  was  unusually  lenient  for 
his  time  and  even  permitted  the  Jews  to  hold  land. 
Louis,  the  Pious,  in  the  first  half  of  the  Ninth  Cen- 
tury, was  still  more  kindly  disposed  toward  them  and 
his  reign  was  long  looked  back  to  as  a  golden  age. 

Meanwhile  one  synod  of  the  church  after  another 
began  to  take  a  stand  against  lending  at  interest. 
As  early  as  the  Eighth  Century  there  were  synodic 
denunciations  of  usury  and  disapproval  of  lending  at 
interest  was  established  as  sound  Christian  doctrine. 
This  attitude  was  based  not  merely  upon  the  Old 
Testament  but  upon  the  statement  of  Aristotle  that 
"Money  in  itself  cannot  grow." 

Finally  in  1146,  Pope  Eugenis  declared  all  inter- 
est void,  and  in  1179  Pope  Alexander  III  publicly 
excommunicated  all  usurers.  The  effect  of  this  bull 
upon  the  fortunes  of  the  Jews  was  curious.  The  ex- 
coitimunication,  of  course,  did  not  embrace  the  Jews 
and  only  tended  to  make  them  still  more  valuable 
commercial  agents,  especially  to  kings  and  rulers  of 

[50] 


THE    FIRST    COINED    SHEKELS 
OF  THE  JEWS 


COMMERCIAL  DEVELOPMENT  OF  JEWS 

provinces.  Israelites,  as  a  result,  became  the  money 
lenders  for  rulers  in  many  lands  and  districts  of 
western  Europe.  It  was  possible  for  them  to  lend 
the  money  of  a  prince  at  interest  where  a  Gentile 
could  not,  if  he  wished  to  remain  a  good  Christian. 
It  was  also  possible,  and  even  customary,  for  the 
ruler  to  seize  their  property  after  the  profits  had  ac- 
cumulated. 

So  useful  did  the  Hebrews  become  that  some 
monarchs  objected  to  having  them  converted  to 
Christianity.  Both  the  kings  of  England  and  of 
France  demanded  compensation  for  such  conver- 
sions, and  until  1281  the  English  king  declared  the 
property  of  a  converted  Jew  forfeited  to  the  crown. 

One  of  the  most  picturesque  of  these  early  Jewish 
financiers  was  Aaron,  of  Lincoln.  He  was  born  in 
the  city  for  which  he  was  named  some  time  before 
1125  and  died  in  1186.  His  financial  operations  were 
so  wide  that  he  had  agents  in  a  number  of  the  English 
cities.  Oddly  enough,  one  of  his  chief  sources  of 
profit  was  advancing  money  for  the  construction  of 
abbeys  and  monasteries.  It  was  through  his  accom- 
modation that  St.  Albans,  Lincoln  Minster  and  at 
least  nine  Cistercian  abbeys  were  built.  At  his  death 
these  monasteries  still  owed  him  equivalent  to  $24,- 
000  which,  judged  by  the  time,  was  an  enormous 
sum,  as  wages  were  then  only  seven  cents  a  day. 

He  also  advanced  money  on  houses,  armour  and 

[51] 


BANKING  THROUGH  THE  AGES 

grain.  At  his  death  Henry  II  seized  his  property 
as  the  estate  of  a  Jewish  usurer,  devolving  by  right 
to  the  crown.  Henry  used  the  cash  to  wage  war 
against  Philip  Augustus  of  France,  while  the  ac- 
counts receivable  formed  a  special  department  in  the 
treasury.  Aaron's  house  still  stands  in  Lincoln  and 
is  probably  the  oldest  private  dwelling  in  all  Eng- 
land. 

The  seizure  of  Aaron's  property  after  his  death 
was  typical  of  the  period.  Royalty  professed  to 
believe  that  the  Jews  had  no  right  to  wealth  gained 
by  money  lending  and  that  it  was  mercy  enough  to 
allow  them  to  hold  it  while  they  lived.  This  belief 
grew  into  a  custom  which  proved  extremely  con- 
venient, not  to  say  remunerative,  whenever  a  rich 
Jew  died. 

Aaron  of  York  was  another  English  Jew  most  of 
whose  property,  acquired  by  the  practice  of  interest, 
went  after  his  death,  to  the  king.  He  himself  stated 
that  he  satisfied  the  demands  of  Henry  III  to  the 
extent  of  30,000  marks  in  silver  and  200  marks  in 
gold. 

A  similar  sufferer  was  Ezmel  de  Ablitas,  a  wealthy 
Jew  of  Navarre.  His  business  of  usury  was  very 
extensive  but  he  was  compelled  to  grant  large  loans 
to  the  King  of  Aragon  and  the  nobles  of  Navarre, 
none  of  which  he  ever  recovered.     After  his  death  his 

[52] 


COMMERCIAL  DEVELOPMENT  OF  JEWS 

property  was  confiscated  by  the  Queen  of  Navarre 
on  the  same  grounds  urged  by  other  rulers  whose  ex- 
cessive piety  led  them  to  filch  the  estates  of  all  Jews 
who  died  rich  enough  for  royalty  to  consider. 


[53] 


**TTT  is  not  by  augmenting  the  capital  of  the 
II  country,  but  by  rendering  a  greater  part  of 
that  capital  active  and  productive  than  would 
otherwise  be  so,  that  the  most  judicious  operations 
of  banking  can  increase  the  industry  of  the 
country." 

Adam  Smith. 


CHAPTER  V 

BANKERS  OF  THE  VENETIAN  FLEETS 

THE  flat  mud  islands  on  which  Venice  stands 
were  made  by  the  waters  of  eleven  rivers  flow- 
ing into  the  Adriatic.  Her  intricate  lagoons 
made  her  a  city  of  asylum  and  refuge  when  Attila 
drove  her  first  inhabitants  before  him  from  the  north. 
The  Adriatic,  lapping  against  her  door  sills,  made 
Venice  the  carrier  of  Europe's  might  into  the  East 
throughout  the  Crusades.  And  the  waters  of  the 
Mediterranean,  subdued  and  controlled  by  the  prows 
of  her  galleys,  made  her  the  mightiest  city  of  the  con- 
tinent when  Constantinople  fell  in  1204  and  Venice 
claimed  and  received,  in  her  own  words  "one  half  and 
one  quarter  of  the  Roman  Empire." 

Venice  eventually  became  mistress  of  the  seas,  as 
far  as  they  were  known  in  the  Middle  Ages.  But 
long  before  that  the  city  had  launched  upon  the  mari- 
time career  which  was  to  bring  such  a  rich  yield. 
Never  has  there  been  a  city  where  business  was  more 
remunerative  or  more  highly  regarded.  By  the  end 
of  the  thirteenth  century  Venice  had  become  an  ab- 
solute oligarchy  of  the  wealthier  families  who  formed 
themselves  into  a  closed  guild  for  no  less  a  pur- 

[55] 


BANKING  THROUGH  THE  AGES 

pose  than  the  exclusive  exploitation  of  the  Levant. 

Business  was  more  important  to  many  of  the 
Venetians  than  religion,  even  in  a  religious  age.  As 
early  as  991  Orseolo  II  had  made  a  commercial  treaty 
with  the  Mohammedans  and  a  little  later,  after  the 
conquest  of  Dalmatia,  the  city  had  established  con- 
trol of  the  Adriatic.  Even  at  that  time  there  was  a 
municipal  mint  which  issued  the  first  reliable  coinage 
of  the  Middle  Ages. 

But  it  was  the  Crusades  which  gave  Venice  her  real 
start  along  the  pathway  toward  imperial  wealth. 
Throughout  the  First,  Second  and  Third  Crusades, 
Venice,  together  with  Genoa,  her  great  rival,  sup- 
plied the  transport  which  moved  the  armies  of  the 
Lord  against  the  Saracens — always  at  a  handsome 
profit.  As  a  result  Venetian  settlements  began  to 
spring  up  all  over  the  East.  There  were  Venetian 
quarters  both  in  Sidon  and  in  Tyre  and  it  is  said  there 
were  fully  200,000  Venetians  in  Constantinople  when 
the  Byzantine  Emperor  Manuel  stripped  them  of 
their  possessions  and  turned  them  out,  precipitating 
a  war  with  the  mother  city.  To  carry  this  particular 
war  to  its  disastrous  conclusion  Venice  was  obliged 
to  levy  a  forced  loan  of  one  per  cent  on  all  net  in- 
comes, guaranteeing  the  loan  at  four  per  cent.  This 
was  in  1171  and  is  supposed  to  be  the  earliest  instance 
of  the  issue  of  government  bonds. 

When   the    Fourth    Crusade   was    proclaimed    at 

[56] 


~   ^*WfS>  ih-\    ,******' 


■"      ■     .  ..  "'■•    :        ,:     ..... 


BANKERS  OF  VENETIAN  FLEETS 

Soissons  it  marked  the  dawn  of  the  full  glory  of 
Venice.  The  city  agreed  to  transport  4,500  horses, 
9,000  knights  and  20,000  foot  soldiery  together  with 
provisions  for  one  year  at  a  price  of  85,000  silver 
marks  of  Cologne  and  one  half  of  all  conquests. 
Dandalo  was  the  Doge  at  that  time  and  proved  him- 
self not  only  a  clever  financier  but  a  political  and 
military  genius. 

When  the  time  came  to  move  the  great  army  the 
Crusaders  could  not  pay.  Zara  and  Dalmatia  were 
at  the  time  in  revolt  against  Venice  so  Dandalo 
agreed  to  postpone  exaction  of  the  payment  if  the 
Crusaders  would  undertake  the  suppression  of  the 
rebellion,  which  they  did  promptly.  But  Dandalo 
had  only  begun  his  operations.  He  managed  to  turn 
the  whole  Crusade  against  Constantinople,  which  had 
so  thoroughly  humbled  Venice  thirty  years  before. 
Largely  through  his  own  intrepid  leadership  the  cap- 
ital of  the  Byzantine  Empire  was  captured  and 
sacked.  That  was  when  Venice  received  "one  half 
and  one  quarter  of  the  Roman  Empire."  Venice 
was  no  longer  a  city.  She  had  become  a  European 
power. 

Thenceforth  the  community  became  absorbed  in 
trade.  Each  year  Venice  acknowledged  its  indebted- 
ness to  the  sea  when  the  Doge  cast  a  ring  from  the 
state  barge  into  the  waters  thus  betrothing  the  city  as 
the  "bride  of  the  Adriatic."     Each  year  the  control 

[57] 


BANKING  THROUGH  THE  AGES 

of  affairs  came  more  into  the  hands  of  the  great 
patrician  families,  organizing  themselves  for  commer- 
cial loot.  Finally  in  1308  all  power  was  concen- 
trated in  the  terrible  Council  of  Ten.  Wars, 
government,  statesmanship — all  were  directed  toward 
the  one  ideal  of  trade  expansion. 

Naturally,  in  a  city-state  organized  on  this  basis, 
finance  and  banking  had  developed  as  an  early  neces- 
sity. The  germ  of  a  state  bank  was  planted  in  1160 
when  the  government  borrowed  150,000  silver  marks 
from  half  a  dozen  of  the  more  important  merchants. 
This  was  the  Monte  Vecchio,  known  as  the  old  debt. 
Thirteen  years  later  came  the  forced  loan  to  prose- 
cute the  war  with  Constantinople  which  added  greatly 
to  the  government's  financial  responsibilities. 

The  right  of  banking  remained  virtually  free  in 
Venice  but  does  not  seem  to  have  been  fully  used. 
Before  1300  we  read  only  of  camsores,  or  money 
changers,  with  benches  in  the  market.  Even  these, 
however,  made  loans  at  interest.  From  1318  there 
are  references  to  a  bancherius  de  scripta  which  im- 
plied genuine  bankers  who  received  deposits  of 
money.  Thereafter  many  of  the  patricians  became 
bankers. 

By  1300  the  city  was  already  using  bills  of  ex- 
change to  send  money  to  its  representatives  abroad. 
These  were  really  business  agents  and  made  frequent 
and  full  reports  of  commercial  opportunities  more 

[58] 


BANKERS  OF  VENETIAN  FLEETS 

efficient  than  those  of  any  consular  service  to-day. 

In  many  cases  loans  made  by  the  Venetian  bankers 
were  a  form  of  bottomry  as  they  depended  for  se- 
curity on  the  prosperous  outcome  of  some  venture  by 
sea.  The  risk  being  great,  the  interest  was  corres- 
pondingly high,  averaging  in  the  fourteenth  and  fif- 
teenth centuries,  perhaps  twenty  per  cent. 

Shakespeare's  "Merchant  of  Venice"  reflects  con- 
ditions on  the  Rialto  at  this  time,  for  Antonio's  ship- 
ping venture  furnished  the  banker  Shy  lock's 
opportunity  for  revenge.  The  Jews,  however,  were 
accepted  as  bankers  only  on  probation,  and  their  li- 
censes were  frequently  revoked. 

Ventures,  such  as  Antonio's,  were  part  of  the  daily 
life  and  business  of  Venice.  Besides  innumerable 
minor  voyages  to  nearby  ports  in  the  Mediterranean, 
great  trading  fleets  were  periodically  sent  out  to  dis- 
tant countries.  For  these  the  state  leased  galleys 
already  supplied  with  arms,  ammunition  and  food 
and  for  protection  dispatched  naval  convoys. 

The  Tana  fleet  sailed  to  the  Black  Sea  for  trade 
with  the  Russians  and  Tartars ;  the  Syrian  fleet  sailed 
to  Asia  Minor;  the  Roumanian  fleet  skirted  Greece 
and  penetrated  to  Roumania ;  the  Egyptian  fleet  an- 
chored at  Alexandria;  while  the  Flanders  Squadron 
sailed  through  the  straits  of  Gibraltar  to  trade  in 
Bruges,  Antwerp  and  London.  Though  the  fleets 
were  under  government  control,  each  ship  was   a 

[59] 


BANKING  THROUGH  THE  AGES 

separate  venture  with  its  own  owner  who,  in  turn,  had 
his  private  banker. 

The  camera,  or  bank,  which  made  loans  to  the  gov- 
ernment, was  receiving  about  200,000  ducats  in  inter- 
est at  the  end  of  the  fourteenth  century.  By  special 
concession  foreigners  were  permitted  to  hold  stock  in 
the  camera  and  it  is  of  record  that  the  Cardinal  of 
Ravenna  held  12,000  ducats  worth  of  this  stock  and 
the  Duchess  of  Milan  100,000  ducats. 

Doge  Tomaso  Mocenigo  declared  in  a  speech  de- 
livered in  1423  that  the  Venetian  exports,  which  cov- 
ered the  "whole  world  from  east  to  west,"  amounted 
annually  to  10,000,000  ducats,  with  imports  at  about 
the  same  sum.  The  profits  on  this  he  calculated  at 
about  4,000,000  ducats,  or  twenty  per  cent.  As  most 
of  this  trade  was  financed  by  the  bankers  it  is  ob- 
vious how  extended  their  operations  were. 

In  1428  the  Venetian  script  outstanding  amounted 
to  9,000,000  gold  ducats.  In  1482  all  the  old  debts 
were  consolidated  in  the  Monte  Vecchio  and  a  new 
loan  of  five  per  cent  was  placed  against  special  taxes. 
Various  bankruptcies  among  private  bankers  in  1502 
led  to  the  establishment  of  a  Supervisor  of  Banks, 
who  had  the  power  to  examine  the  solvency  of  any 
firm.  In  1525  the  city,  in  order  to  raise  money,  be- 
gan to  offer  annuities  in  return  for  deposits  in  the 
mint  or,  if  the  depositor  preferred  he  could  have  per- 
petual interest  at  a  lower  rate. 

[60] 


ONE    OF    THE    FIRST    VENETIAN 
COINS,     NINTH    CENTURY 


BANKERS  OF  VENETIAN  FLEETS 

By  a  decree  of  the  Senate  the  first  official  state 
bank  of  Venice  was  established  in  1587.  A  second 
institution,  the  Banco  del  Giro,  known  as  the  Bank 
of  Venice,  was  founded  in  1618,  based  on  a  loan  of 
600,000  ducats  advanced  to  the  city  by  Giovanna 
Vendarmin. 

Both  of  these  banks  were  without  capital  and 
functioned  merely  as  depositories  under  the  manage- 
ment of  public  officials.  They  received  funds  from 
the  state  and  individuals,  charging  the  latter  a  stipu- 
lated rate.  On  order  of  depositors  transfers  were 
made  on  their  books  and  bills  of  exchange  were  paid 
by  similar  transfer.  It  was  Venetian  law  that  the 
tender  of  such  a  bank  credit  for  more  than  a  hun- 
dred ducats  could  not  be  refused.  It  was  a  basic 
principle  of  these  banks  that  their  cash  or  bullion  on 
hand  should  equal  their  receipts  but,  as  they  were 
compelled  to  make  loans  to  the  government,  they 
were  forced  to  suspend  payment  more  than  once. 

Nevertheless  the  bank  prospered  when  the  de- 
mands on  it  were  not  too  heavy.  In  1754  interest 
was  temporarily  reduced  to  three  and  one-half  per 
cent,  but  in  1766  it  was  restored  to  four  per  cent  with 
a  promise  to  pay  depositors  on  demand. 

But  all  this  later  bank  development  constituted 
mere  vestigial  remains  of  financial  over-lordship. 
Venice  had  long  since  lost  her  power  and  with  it 
much  of  her  affluence.     When  the  Portuguese  began 

[61] 


BANKING  THROUGH  THE  AGES 

to  sail  round  the  Cape  of  Good  Hope  the  Mediter- 
ranean ceased  to  be  the  sole  highway  to  the  East. 
Even  before  this,  exhausting  though  victorious  wars 
with  Genoa,  and  equally  exhausting  and  losing  wars 
with  the  Turks  had  sapped  the  strength  of  the  state. 
Yet  Venice  remained  a  free  city  until  Napoleon 
brought  the  first  victorious  enemy  within  its  water 
gates. 

The  French  even  burned  the  famous  "Golden 
Book"  in  which  were  entered  the  names  of  the  great 
patrician  merchants,  the  hereditary  princes  of  trade 
and  finance.  Since  then  Venice  has  possessed  only  a 
past. 


[62] 


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CHAPTER  VI 

RENAISSANCE  OF  BANKING  AND 
THE  BANK  OF  ST.  GEORGE 

FINANCE — what  we  understand  to-day  as  the 
power  of  money  and  credit — collapsed  in  Eu- 
rope with  the  fall  of  the  Roman  Empire. 
All  through  the  Dark  Ages,  banking,  save  as  it  func- 
tioned clumsily  through  the  unskilled  hands  of  feudal 
bursars,  lay  under  an  eclipse. 

But  along  with  that  extraordinary  reflowering  of 
civilization  which  we  call  the  Italian  Renaissance  it 
came  to  life  once  more.  Indeed,  so  vigorous  was  the 
new  commercial  growth  that  in  a  number  of  the  more 
splendid  Italian  civic  republics  it  threatened  to  swal- 
low the  state  itself. 

Before  Columbus  opened  the  highways  of  the 
western  ocean  the  Mediterranean,  of  course,  was  the 
great  avenue  of  freighted  ships.  The  cities  of  the 
Italian  peninsula,  which  seemed  to  reach  down  like  a 
sickle  to  reap  the  sea-borne  harvest,  naturally  became 
thriving  centres  of  this  maritime  trade.  Banking, 
which  early  developed  as  a  necessary  adjunct  of  their 
water  traffic,  became  a  passion,  then  an  art,  and  fi- 
nally almost  a  form  of  government. 

[63] 


BANKING  THROUGH  THE  AGES 

Venice,  Florence  and  Genoa  were  the  chief  bene- 
ficiaries of  this  commercial  revival  and  the  repositories 
of  the  accruing  wealth.  The  business  methods  of 
all  three  showed  a  general  similarity,  but  each  devel- 
oped a  characteristic  phase  of  banking.  In  Flor- 
ence, for  example,  banking  fell  largely  into  the  hands 
of  great  private  families.  In  Genoa,  perhaps,  bank- 
ing most  nearly  approached  a  public  function  through 
the  famous  Bank  of  St.  George. 

The  Bank  of  St.  George,  which  eventually  ruled 
a  whole  broad  territory  along  the  north-western 
Italian  littoral,  was  at  once  one  of  the  oldest  and 
longest  lived  of  the  institutions  sprung  from  mediae- 
val finance.  So  firmly  was  it  founded,  so  sagaciously 
directed  and  so  tenaciously  jealous  of  its  privileges 
that  it  was  able  to  function  continuously  through 
seven  centuries.  In  fact,  it  may  be  studied  as  the 
epitome  of  that  system  which  enabled  these  tiny 
Italian  republics,  politically  so  weak  they  could  never 
successfully  defend  their  own  borders,  to  finance  the 
wars  of  emperors  and  develop  within  themselves  a 
standard  of  culture  unmatched  by  any  contemporary 
court  of  Europe. 

The  name  of  the  bank  itself  suggests  its  mediaeval 
origin  at  a  time  when  all  human  enterprises,  even 
those  on  which  the  Church  looked  somewhat  coldly, 
must  have  a  patron  saint.  Saint  George  was  that 
gallant  Roman  military  tribune  in  Cappadocia  who 

[64] 


RENAISSANCE  OF  BANKING 

became  a  Christian  and  for  his  faith  was  put  to 
death  by  the  Emperor  Diocletian  in  303  a.  d.  His 
spirit,  invoked  by  the  Genoese  bankers,  is  the  same 
ghostly  presence  which  marches  ahead  of  the  armies 
of  England  and  Portugal  and  is  supposed  to  have 
swung  a  doughty  blade  with  the  Crusaders  against 
the  Turk.  In  1101  the  fleets  of  both  Genoa  and 
Venice  had  played  a  prominent  part  in  reinforcing 
the  First  Crusade.  In  1147  came  the  Second 
Crusade,  with  the  spirit  of  St.  George  still  leading. 

It  was  only  a  year  later  when  the  initial  step  in  the 
organization  of  the  bank  was  undertaken  and  Genoa 
contracted  her  first  formal  loan.  The  money  was 
borrowed  on  future  custom  duties  and  the  creditors 
formed  a  council  to  protect  their  interests.  Each 
hundred  lire  of  the  debt  was  called  a  luogo,  or  share. 
Any  number  of  shares  issued  to  an  individual  com- 
prised a  column,  as  they  were  entered  in  a  book  called 
the  cortulario.  New  loans  were  separately  kept. 
Each  was  called  a  compera  and  together  they  were 
known  as  the  "Compere  of  St.  George." 

Within  the  next  hundred  years  loans  became 
numerous  and  their  management  correspondingly 
complicated.  In  1252,  therefore,  they  were  placed 
under  the  control  of  a  single  corporate  body  with  a 
chancellor  and  various  other  officials.  Each  loan,  as 
before,  was  kept  separately,  with  different  security 
and  interest.     The  name  "Compere  of  St.  George" 

[65] 


BANKING  THROUGH  THE  AGES 

was  officially  adopted  so  that  the  date,  1252,  is  often 
cited  as  that  of  the  founding  of  the  bank. 

Genoa  continued  to  prosper  and  expand.  Loans 
multiplied  right  and  left.  In  1302  it  was  necessary 
to  call  a  great  assembly  which  appointed  commis- 
sioners to  draw  up  271  articles  for  the  control  of  the 
compere.  One  of  these  stipulations  was  that  the 
city  was  thereafter  to  contract  no  loan  without  the 
sanction  of  the  consuls  of  the  compere. 

The  Bank  of  St.  George  operated  essentially  as  a 
loan  bank  and  in  this  respect  offered  a  complete  con- 
trast to  the  Bank  of  Amsterdam.  Sometimes  the 
loans  were  made  on  curious  security.  In  1336  Car- 
dinal Fieschi  received  a  loan  on  the  sacred  parossidis, 
or  holy  basin.  Although  the  Catholic  Church  through 
the  Middle  Ages  officially  frowned  on  bankers  and 
held  interest  in  any  form  to  be  mere  usury,  this  little 
business  arrangement  with  the  Cardinal  indicates  the 
beginning  of  a  certain  latitudinarianism.  In  the 
15th  century  the  Popes  Calixtus  III  and  Sixtus 
IV  formally  granted  permission  to  hold  shares  in 
the  bank.  These  were  a  profitable  investment,  for 
the  bank,  in  return  for  loans,  received  the  pledge 
of  the  city  for  its  future  taxes,  or  in  the  case  of  in- 
dividuals, the  profits  of  business  enterprises.  Jewels, 
also,  were  a  customary  form  of  security. 

Like  all  the  Italian  mercantile  republics  Genoa 
was  turbulent.     During  the  revolution  of  1339  all 

[66] 


GENOESE  BANKERS  IN  CONFERENCE LATE 

FOURTEENTH  CENTURY 


RENAISSANCE  OF  BANKING 

the  old  books  of  the  bank  were  burned  and  new  com- 
missioners appointed  to  regulate  the  compere.  The 
city  treasury  was  completely  exhausted  by  building 
and  outfitting  twenty-six  galleys  required  in  one  of 
the  innumerable  naval  wars  and  was  forced  to  cede 
the  loot  of  conquest  to  the  compere. 

By  1371  more  wars  and  constant  internal  conflict 
had  utterly  destroyed  the  credit  of  the  city.  Fran- 
cesco Vivaldi,  an  old  patrician,  rose  before  the  as- 
sembly, and,  after  explaining  the  principle  of  com- 
pound interest,  gave  his  shares  in  trust  to  the  consuls 
of  the  compere  to  use  the  interest  on  them  in  buying 
other  shares  and  the  interest  on  these,  in  turn,  to  buy 
still  others.  This  gift,  accumulating  as  it  was  bound 
to,  is  said  to  have  saved  the  credit  of  the  state. 
Vivaldi  having  shown  the  way,  similar  trusts  were 
formed  for  the  maintenance  of  churches,  bridges, 
fountains  and  other  public  improvements. 

It  was  in  1407  that  the  bank  evolved  fully  into  a 
great  public  institution.  The  republic  had  borrowed 
huge  sums  and  had  assigned  various  revenues  as  se- 
curity. To  avoid  confusion,  all  the  shares  were 
united  in  the  compere,  or,  as  it  now  became  known, 
the  Bank  of  St.  George. 

The  management  was  placed  in  the  hands  of  eight 
protectors,  who  were  elected  annually  by  the  share- 
holders from  a  list  of  thirty-two  chosen  by  lot. 
Each  protector    (or  director)    was  obliged  to  hold 

[67] 


BANKING  THROUGH  THE  AGES 

shares  amounting  to  1,000  Genoese  florins.  This 
directorate  of  eight  filled  the  offices  of  president, 
treasure  general,  superintendent  for  the  sale  of 
shares,  three  judges  and  two  secretaries.  The  gen- 
eral council  consisted  of  480  members,  elected  by 
ballot,  and  qualified  by  the  ownership  of  at  least  ten 
shares.  It  is  a  striking  testimony  to  the  breadth  of 
Genoese  business  practice  that  even  foreigners  were 
eligible. 

The  assumption  by  the  bank  of  state  affairs  is  il- 
lustrated in  a  remarkable  floating  debt  voted  by  the 
directors  in  1456.  As  a  result  of  the  war  against  the 
Turks  it  was  necessary  to  delay  the  payment  of 
certain  loans  for  three  years.  These  were  listed 
separately  as  entered  debts  to  be  repaid  three  years 
after  each  matured.  By  this  time  the  bank  had 
gradually  become  an  independent  government  within 
a  government.  When  Mohammed  II  and  his  Otto- 
man army  captured  Constantinople  in  1453  Genoa 
ceded  its  Black  Sea  possessions  to  the  bank.  At  one 
time,  also,  Corsica,  Cyprus,  and  the  towns  along  the 
Riviera  were  under  the  direct  government  of  the 
bank.  Its  directorate  did  not  deign  to  acknowledge 
allegiance  to  the  city  even  by  so  much  as  flying  the 
red  cross  of  Genoa  but  proudly  unfurled  the  ban- 
ner of  St.  George. 

Machiavelli,  from  his  neighbouring  retreat  at  San 
Casciano,  noted  the  growing  power  and  independence 

[68] 


ANCIENT    EGYPTIAN    BRACELETS    USED    AS    MONEY 


RENAISSANCE  OF  BANKING 

of  the  bank.  Such  a  successful  oligarchy  fitted  in 
well  with  his  subtle  system  of  government.  In  his 
History  of  Florence  he  remarked:  "If  it  should 
happen  that  Genoa  should  fall  entirely  into  the  pos- 
session of  the  Bank  of  St.  George,  it  will  then  be- 
come a  republic  of  greater  importance  than  even  that 
of  Venice." 

This  tendency  of  the  bank  to  arrogate  state  powers 
to  itself  had  been  anxiously  observed  within  the  city. 
In  1528  an  effort  was  made  to  curb  it  by  a  law  pro- 
viding that  anyone  who  held  an  appointment  under 
the  government  could  not  hold  one  under  the  bank. 
But  as  a  result  of  the  famine  of  1550  the  government 
was  forced  into  a  new  and  supine  policy  which  held 
the  possibility  of  complete  absorption  within  the  bank. 
In  return  for  a  heavy  loan  it  agreed  to  turn  over  cer- 
tain taxes,  not  merely  for  a  limited  period,  but  in  per- 
petuity. In  a  word,  it  sold  the  people's  tax  power 
for  the  loan. 

Throughout  this  period  of  growing  power  the  bank 
had  continued  to  sell  shares  in  different  loans,  even  by 
auction  on  the  street  corners — a  scheme  which  sug- 
gests a  resemblance  to  the  New  York  curb  market. 
In  1675,  however,  the  bank  ceased  these  street  sales 
and  established  four  branches  in  the  city.  Thence- 
forth the  term  compere  went  out  of  usage  and  the 
institution  was  known  exclusively  as  a  bank. 

The  credit  of  the  organization  remained  unim- 

[69] 


BANKING  THROUGH  THE  AGES 

paired  until  its  gold  reserve  was  carried  off  by  the 
Austrian  army  in  1740.  Even  then  the  interest  due 
was  carried  as  new  loans  and  eventually  repaid. 
But  the  death  Stroke  came  in  1800,  during  the  French 
Revolution.  The  revolutionaries  deprived  the  bank 
of  its  dearest  privilege,  the  right  to  receive  taxes 
which  had  been  pledged  as  security  for  loans.  This 
was  its  chief  source  of  income.  Shortly  after  the 
passage  of  this  fatal  decree  the  Bank  of  St.  George, 
which  dated  its  beginning  from  1148  and  had,  at  the 
height  of  its  influence,  exercised  all  the  functions  of 
a  principality,  closed  its  doors  for  ever. 


[70] 


LORENZO    THE    MAGNIFICENT,     PINNACLE    OF    THE 
FAMOUS    FAMILY    OF    THE    MEDICI 


CHAPTER  VII 

THE  FLORENTINE  GUILD  AND  THE 
BANK  OF  THE  MEDICI 

IN  1252  the  bankers  of  Florence,  acting  through 
an  already  well  organized  guild,  issued  the  first 
gold  florin.  It  was  a  handsome  coin,  displaying 
on  the  obverse  a  lily  and  on  the  reverse  an  effigy  of 
John  the  Baptist.  But  more  important  than  that, 
it  was  an  honest  coin  and  instantly  rang  true  among 
the  various  and  somewhat  dubious  currency  on  which 
the  world  then  depended.  In  other  cities  of  Italy,  in 
France,  Spain  and  even  Germany,  the  florin  rapidly 
became  a  standard  of  value  because  it  was  depend- 
able in  weight  and  pure  in  quality. 

In  1492  died  Lorenzo,  the  Magnificent,  pinnacle 
of  the  famous  family  of  the  Medici.  Florence,  rich- 
est of  the  renaissance  cities,  was  richest  of  all,  per- 
haps, in  great  names — Giotto,  Michel  Angelo, 
Andrea  Pisano,  della  Robbia,  Leonardo  da  Vinci, 
Machiavelli,  Vasari,  Boccaccio,  Tasso,  Galileo.  But 
all  the  dazzling  qualities  of  the  city  seemed  to  flower 
in  the  illustrious  name  of  Lorenzo,  banker  and 
Maecenas. 

[71] 


BANKING  THROUGH  THE  AGES 

Between  these  two  dates,  each  typical  of  a  period, 
Florence  became  not  only  the  wonder  city  of  Italy, 
but  the  financial,  artistic  and  intellectual  capital  of 
Europe.  Only  Athens  in  the  age  of  Pericles  can 
be  compared  to  Florence  in  the  time  of  Lorenzo. 
And  as  for  the  eminence  of  the  Medici  in  finance, 
nothing  quite  like  it  had  been  heard  of  in  the  world 
before.  But  curiously  enough,  Lorenzo  died  in  the 
very  year  of  a  discovery  that  was  inevitably  to  shift 
the  tide  of  progress  westward  and  change  Florence 
from  a  world  capital  once  more  into  a  provincial 
centre. 

The  Medici,  like  most  of  the  great  families  of  the 
city,  were  bankers  and  members  of  the  bankers  guild, 
which  had  produced  other  financiers  of  continental 
calibre  in  the  Bardi  and  the  Peruzzi,  while  the  Medici 
were  still  struggling  for  a  commercial  and  political 
foothold.  The  bankers,  fourth  of  the  seven  great 
guilds,  which  through  their  representatives  largely 
controlled  the  city,  was  as  exclusive  as  it  was  inclu- 
sive. No  man,  no  matter  what  his  connections,  could 
bank  in  Florence  unless  he  was  a  member  and  had 
served  an  apprenticeship  with  the  guild. 

The  bankers  guild  was  a  very  ancient  and  honour- 
able society.  As  far  back  as  1204  the  consuls  of  the 
guild  of  bankers  and  money  changers  appear,  along 
with  the  consuls  of  the  other  guilds,  as  signatories  to 
the  treaty  with  Sienna.     Records  of  this  interesting 

[72] 


COAT   OF  ARMS  OF   THE   MEDICI 

Today  the  only  survival  of  the  famous 
Bank  of  the  Medici  is  the  familiar  sign 
of  the  three  golden  balls  displayed  above 
pawnbroking  establishments,  an  adapta- 
tion from  the  six  red  balls  on  the  gold 
field  of  the  Medici  shield  and  the  guild 
shield  with  its  red  field  strewn  with 
eleven    gold    florins. 


THE  FLORENTINE  GUILD 

organization  are  still  extant.     They  reveal  in  detail 
the  mediaeval  formula  for  creating  a  banker. 

If  a  boy  wished  to  enter  the  guild  he  first  signed 
the  matriculation  roll  and  then  submitted  to  an  ex- 
amination before  the  consuls.  The  aptness  and 
capacity  of  the  candidate  were,  of  course,  taken  into 
consideration,  but  five  qualifications  were  regarded  as 
absolutely  essential.  It  was  required  of  him  to  be  a 
native  of  the  city,  to  have  two  sponsors,  never  to  have 
been  arrested,  to  be  himself  a  property  owner  (or  heir 
to  property)  and  to  have  paid  the  state  tax.  If  he 
was  accepted  an  entrance  fee  was  exacted,  which 
varied  from  time  to  time  but  was  always  compara- 
tively high. 

The  fledgling  banker  remained  an  apprentice  for 
from  five  to  seven  years.  During  this  probationary 
period  his  wages  were  never  more  than  ten  lire  a 
year,  but  his  board  and  lodging  were  found  for  him. 
If  he  proved  a  satisfactory  apprentice  he  was  ad- 
vanced to  a  clerkship  in  which  he  was  supposed  to 
acquire  additional  knowledge  for  another  three  years 
before  he  was  permitted  to  set  up  in  business  for  him- 
self. 

Members  of  the  guild  had  the  exclusive  right  to 
favoured  locations  in  the  market,  such  as  those  in  the 
Mercato  Nuovo  or  along  the  Via  di  Tavolini.  The 
outfit  of  the  guild  money  changer  and  lender  was  a 
simple  one — a  chair  and  table  for  his  convenience  and 

[73] 


BANKING  THROUGH  THE  AGES 

a  green  table  cloth  as  the  official  and  protected  in- 
signia of  his  trade.  A  daybook  of  ordinary  paper,  a 
few  sheets  of  parchment  and  a  balance  for  weighing 
coins  completed  his  office  paraphernalia. 

His  stock  of  gold  coin  he  carried  in  a  pouch  fast- 
ened to  his  girdle.  Silver  for  small  change  was  kept 
in  a  bowl  on  the  table.  It  was  customary,  certainly 
in  the  earlier  days  of  the  guild,  to  test  both  gold  and 
silver  by  weight,  though  the  florin,  worth  about  $2.40, 
was  presumed  to  be  standard. 

Under  the  rules  of  the  guild  members  were  com- 
pelled to  keep  books  which  were  open  to  the  inspec- 
tion of  its  officers.  It  was  also  required  that  these 
accounts  be  kept  legibly  in  Roman  figures  without 
capitals  or  special  punctuation.  The  new-fangled 
Arabic  notation,  lately  introduced  from  Spain,  was 
not  acceptable. 

Up  to  the  time  of  the  Medici  books  were  kept  on 
the  single  entry  system,  but  there  were  duplicate  sets 
and  the  daybooks  were  copied  into  master  ledgers. 
These  were  stoutly  constructed  with  leaves  of  parch- 
ment and  clamped  and  locked  bindings.  Such  master 
ledgers,  of  course,  were  retained  at  the  offices  of  the 
guild.  A  general  balance  was  struck  once  a  year 
and  at  the  same  time  the  value  of  coins  and  rates  of 
interest  were  officially  fixed. 

Interest  was  very  high  and,  according  to  our  stand- 
ards,  simply  crushing  to   the  debtor.     The   disap- 

[74] 


THE  FLORENTINE  GUILD 

proval  of  the  church  seemed  to  make  little  difference. 
In  1427,  for  example,  according  to  the  ledger  of 
Bardi  and  Piccioli,  the  interest  on  2,928  lire  was  878 
lire,  or  almost  30  per  cent.  Apparently  the  legal 
rate  was  based  on  what  the  traffic  would  bear.  But 
the  guild  itself  seemed  to  be  conscious  of  the  exor- 
bitance of  these  exactions,  for  three  years  later  it 
forbade  its  members  to  charge  more  than  four  denari 
a  month.  As  this  rate,  however,  amounted  to  20  per 
cent  a  month,  the  bankers  still  remained  fairly  well 
protected. 

Many  of  the  terms  of  the  Florentine  bankers  have 
come  down  to  us  and  form  a  substantial  part  of  our 
own  financial  glossary, — cassa,  for  instance,  as  cash; 
banco  as  bank;  giornale  as  journal;  debitor e  as 
debtor;  and  creditor e  as  creditor. 

The  headquarters  of  the  guild  long  stood  in  the 
Mercato  Nuovo.  This  splendid  building  was  a 
monument  to  the  prosperity  and  culture  of  the  city. 
Its  ceilings  glowed  with  many-coloured  murals  by  the 
most  distinguished  Florentine  artists  and  its  walls 
were  hung  with  rich  tapestries  and  pictures  in  the 
then  newly  discovered  oil  paints  as  a  background  for 
exquisite  Florentine  sculpture  and  the  marvellously 
wrought  furnishings  of  the  period.  The  opening  and 
the  closing  of  the  city's  business  day  hung  upon  the 
toll  of  the  great  bell  in  the  bankers  guild. 

It  was  inevitable  that  a  system  so  well  organized 

[75] 


BANKING  THROUGH  THE  AGES 

and  perfected  should  develop  international  banking 
on  a  large  scale.  As  early  as  1260  the  guild  had  be- 
gun to  issue  letters  of  credit  through  the  individual 
bankers  and  funds  were  sometimes  sent  as  far  away 
as  Jaffa,  or  Tana,  on  the  Sea  of  Azov. 

There  were  two  great  eras  of  international  bank- 
ing in  Florence.  The  first  centred  around  the  Bardi 
and  Peruzzi  who  were,  in  their  time,  the  supreme 
financiers  of  mediaeval  Europe.  In  the  14th  century 
the  Bardi  established  agencies  as  far  north  as  Eng- 
land and  Germany  and  as  far  east  as  Rhodes,  while 
the  130  agencies  of  the  Peruzzi  extended  from  Lon- 
don to  Constantinople. 

Both  houses  advanced  huge  sums  to  Edward  II 
and  III  of  England,  and  to  the  King  of  Sicily,  and 
both  were  thrown  into  bankruptcy  when  the  English 
King  and  Parliament  refused  to  repay  £700,000  and 
the  King  of  Sicily  defaulted  at  about  the  same  time. 

It  was  not  until  the  rise  of  the  Medici  that  Flor- 
ence recovered  from  this  blow.  Banking  had  been 
the  profession  of  the  Medici  for  a  long  time  but  the 
first  of  the  family  to  attain  pre-eminence  was  Gio- 
vanni de  Medici.  Giovanni  was  born  in  1360  and  as 
a  young  man  went  through  the  regularly  prescribed 
steps  of  an  apprentice  in  the  bankers  guild. 

As  Giovanni  rose  to  wealth  and  power  he  left  his 
green-covered  table  in  the  market  place  and  built 

[76] 


LOGGIA   DEL   MERCATO   NUOVO 

Built  by  G.  B.  del  Tasso,  1547,  especially  for  the  money  changers 

and  used  by  the  bankers  in  the  days  of  the  Medici. 


THE  FLORENTINE  GUILD 

himself  a  palace  in  the  hall  of  which  his  main  business 
was  conducted,  though  he  had  branch  banks  in  a 
number  of  Italian  cities.  These  bankers'  mansions 
were  a  feature  of  Florence  and  gave  the  names  to 
many  of  the  principal  streets  such  as  the  Peruzzi, 
Tornabucai,  Albizzi,  Greci,  Bardi  and  Cerchi. 

Perhaps  Giovanni's  most  successful  venture  was 
during  the  council  of  Constance,  from  1414  to  1418, 
when  he  cleared  a  fortune.  In  1429  his  estate  was 
reckoned  at  180,000  gold  florins,  or  $450,000  which  at 
that  time  had  an  enormous  purchasing  power.  As 
Machiavelli  phrases  it:  "He  died  exceedingly  rich 
in  money,  but  still  more  in  good  fame  and  the  best 
wishes  of  mankind ;  and  the  wealth  and  respect  he  left 
behind  him  were  not  only  preserved  but  increased  by 
his  son  Cosmo." 

Cosmo  remained  a  banker,  conserving  and  develop- 
ing his  patrimony  into  another  great  fortune.  But 
he  enjoyed  an  even  wider  success  in  politics  and  be- 
came, in  effect,  the  dictator  of  Florence,  though  he 
made  a  pretence  of  ruling  through  the  old  republican 
forms.  In  1449  Cosmo's  son  Lorenzo  was  born  and 
lived  to  earn  the  title  of  "the  Magnificent." 

Lorenzo  lived  in  princely  style  and  his  lavish  pat- 
ronage of  the  arts  attracted  about  him  most  of  the 
great  figures  of  his  time  into  a  veritable  court  of 
talent.     He  was  a  man  of  no  mean  talent  himself  and 

[77] 


BANKING  THROUGH  THE  AGES 

wrote  vivacious  prose  as  well  as  excellent  poetry. 
Indeed,  he  was  not  above  singing  carnival  songs  of 
his  own  composition  in  the  public  streets  and  these 
were  not  less  appreciated  because  they  were  often 
indecent. 

But  though  Lorenzo  busied  himself  less  about  his 
business  than  his  father  and  grandfather  had  done, 
the  reputation  of  the  banking  house  of  the  Medici 
continued  to  mount  so  high  that  it  was  recognized  all 
over  Europe.  The  standing  of  the  Medici  may  be 
gauged  from  the  fact  that  when  Edward  of  England 
invaded  France  in  1475  and  was  bought  off  by  Louis 
XI  on  the  promise  of  50,000  crowns  a  year  for  a 
hundred  years,  it  was  stipulated  that  the  Bank  of  the 
Medici  should  be  made  surety  for  the  continued  pay- 
ment of  the  indemnity.  In  other  words,  Louis  XI 
was  to  establish  a  trust  fund  with  them  for  the  period 
of  a  century.  Other  events  prevented  the  fulfilment 
of  this  agreement  but  it  illustrates  the  enormous  pres- 
tige of  the  Florentine  Magnifico. 

After  Lorenzo  another  branch  of  the  family  car- 
ried the  name  to  further  fame  and  into  the  papacy 
itself,  but  it  was  not  essentially  as  financiers  that  they 
prospered.  Two  centuries  after  Lorenzo's  death  the 
family  had  withdrawn  from  all  direct  connection  with 
banking. 

To-day  the  only  survival  of  the  famous  Bank  of  the 
Medici  is  the  familiar  sign  of  the  three  golden  balls 

[78] 


THE  FLORENTINE  GUILD 

displayed  above  pawnbroking  establishments,  an 
adaptation  from  the  six  red  balls  on  the  gold  field  of 
the  Medici  shield  and  the  guild  shield  with  its  red 
field  strewn  with  eleven  gold  florins. 


[79] 


B 


441C5  ^  doing  good  with  his  money,  a  man  as  it 
were  stamps  the  image  of  God  upon  it,  and 
makes  -both  pass  current  in  the  merchandise  of 
Heaven." 

Rev.  E.  Rutlkdge. 


CHAPTER  VIII 

FINANCES  OF  BARCELONA 

IF  one  wished  to  be  fanciful  he  might  say  that  the 
Gods  had  assured  Barcelona  of  a  fortunate  fu- 
ture. For  there  is  a  tradition  that  Hercules 
founded  the  city  four  hundred  years  before  Romulus 
had  thought  of  building  Rome. 

However  that  may  be,  the  origin  of  Barcelona  is 
ancient  enough.  It  seems  to  have  been  established 
during  the  Carthaginian  supremacy  in  Spain  by 
Hamilcar  Barca,  father  of  Hannibal,  who  was  to 
come  nearer  the  conquest  of  Rome  than  any  of  the 
ancients.  The  city  at  that  time  was  called  Barcina, 
after  its  founder,  and  so  derives  its  present  name 
which  was  officially  confirmed  when  the  Bishopric  of 
Barcelona  was  created  in  343  a.  d. 

After  the  Roman  power  was  withdrawn  from  Fa- 
ventia,  as  the  city  was  known  for  a  time,  it  underwent 
a  number  of  vicissitudes  and  fell  before  the  Moorish 
invasion  in  713.  It  was  probably  shortly  after  this 
that  the  Jews  who  later  played  an  important  part  in 
the  economic  life  of  the  town,  became  prominent. 
The  Christians,  aided  by  Charlemagne,  recaptured 
Barcelona  in  788.     Thenceforth,  until  the  union  of 

[81] 


BANKING  THROUGH  THE  AGES 

Catalonia  with  Aragon  in  1149,  it  was  nominally 
ruled  by  the  counts  of  Catalonia,  who  claimed  to  be 
independent. 

Through  all  this  time  the  superb  situation  of  Bar- 
celona had  constantly  tended  to  make  it  an  impor- 
tant city  and  eventually  it  became  supreme  on  the 
eastern  coast  of  Spain.  As  early  as  1227  the  Bar- 
celonian  fleet  was  so  numerous  that  it  was  decreed 
these  ships  should  monopolize  the  trade  with  Egypt 
and  Barbary. 

Most  important  among  the  industries  of  the  city 
was  woollen  manufacture.  This  must  have  been  or- 
ganized before  1257  because  there  is  a  record  that 
the  wool  dyers  had  a  guild  at  that  date.  In  1258  the 
great  municipal  council  numbered  one  hundred  and 
fourteen  representatives  of  the  various  trades. 
Among  them  were  six  cloth  merchants,  nine  wool 
dealers,  and  four  cotton  spinners.  And  to  show  that 
banking,  even  at  that  time,  was  looked  on  as  an  es- 
sential vocation,  there  were  four  money  changers. 

Barcelona  lies  at  the  foot  of  Mount  Monjuich. 
In  Roman  times  this  elevation  was  known  as  the 
Mount  of  Jove  but  in  the  Middle  Ages  it  was  called 
Mons  Judacius  and  seems  to  have  been  set  aside  en- 
tirely as  a  Jewish  quarter.  Therefore,  it  is  quite 
natural  to  find  a  Jew  as  the  first  famous  financier  of 
Barcelona. 

This  was  Benveniste  de  Porta,  a  man  of  wide  rep- 

[82] 


SETTLEMENT    OF    ACCOUNTS    BY    MEDIEVAL    GUILD 1466 


FINANCES  OF  BARCELONA 

utation  in  his  day.  In  1257  he  had  become  a  backer 
of  royalty,  for  the  records  show  that  on  December 
seventeenth  of  that  year  he  advanced  3,863  sueldos 
to  King  James  I  of  Aragon.  The  loan  was  secured 
and  was  to  be  collected  from  the  dues  of  his  bailiwick. 

Repeatedly  during  the  next  few  years  he  acted  as 
the  King's  financier.  In  January,  1258,  for  ex- 
ample, he  received  the  right  to  dispose  of  the  taxes 
of  Barcelona  and  Gerona  for  two  years.  Again,  in 
return  for  a  loan  of  200,000  sueldos  to  the  King,  he 
was  authorized  to  collect  the  revenues  of  Lerida  and 
other  places.  On  June  12,  1260,  King  James  drew 
a  draft  against  him  for  5,000  sueldos,  which  is  one  of 
the  earliest  references  to  such  a  commercial  paper. 

In  1262  Benveniste  advanced  15,221  sueldos  to 
the  account  of  the  Infanta  Donna  Juana  and  re- 
ceived in  return  the  dues  of  Villafranca  and  twenty 
squares  of  land.  This  land  grant  is  of  peculiar  in- 
terest and  significance  as  in  most  places  throughout 
Christendom  the  Jews  were  forbidden  to  hold  land. 
King  James,  however,  was  a  liberal  minded  ruler, 
and  to  prove  it  once  listened  to  a  debate  between  a 
Christian,  a  Mohammedan  and  a  Jew. 

Benveniste  seems  to  have  financed  most  of  the  op- 
erations in  Barcelona  at  this  time.  In  1264  he 
loaned  15,000  sueldos  to  the  Bishop  of  Barcelona, 
indicating  that  religious  intolerance  was  rampant  on 
neither  side.     Four  years  later  he  was  again  granted 

[83] 


BANKING  THROUGH  THE  AGES 

the  right  to  collect  the  dues  of  Gerona.  All  this  time 
the  King  seems  to  have  regarded  him  with  the  most 
friendly  spirit.  As  a  token  of  his  favour  James  even 
went  so  far  as  to  pardon  Benveniste's  brother  for  de- 
faming the  Christians. 

The  sheep  raisers  formed  a  guild  in  1273  which 
continued  an  economic  factor  in  the  life  of  the  city 
for  hundreds  of  years.  The  next  year,  however, 
commerce  was  threatened  when  trade  with  the  Mo- 
hammedans was  forbidden.  But  Barcelona  was  too 
near  Moslem  territory  for  such  a  suppression  to  be 
entirely  effective.  About  this  time,  churchly  influ- 
ence also  brought  about  a  limit  of  twenty  per  cent 
on  interest,  which  still  further  turned  the  money  lend- 
ing business  into  the  hands  of  the  Jews. 

During  the  reign  of  Pedro  III,  from  1276  to  1285, 
Sicily  was  conquered.  This  put  Aragon  into  close 
touch  with  Italy,  as  well  as  Sicily,  resulting  in  the 
spread  of  Italian  influence  into  Barcelona  itself. 
During  this  period  the  merchants  of  Barcelona  com- 
peted with  Italy  for  the  trade  of  the  Levant  and 
were  among  the  earliest  to  establish  consuls  and  fac- 
tories in  distant  ports.  The  celebrated  code  of  mar- 
itime law,  Consolato  del  Mar,  is  believed  to  have  been 
drawn  up  at  Barcelona.  The  extension  of  commerce 
developed  the  issue  of  marine  insurance  at  an  early 
date. 

Sicily  was  an  island  of  mixed  population  and  har- 

[84] 


MEDIEVAL   COINAGE   OF   BARCELONA.       SOME    OF    THESE 
COINS    WERE    ISSUED    BY    JAMES    I    OF    ARAGON 


FINANCES  OF  BARCELONA 

bored  Greeks  and  Mohammedans  as  well  as  Italians. 
Sericulture  had  long  been  introduced  there  and  after 
Pedro's  conquest  silk  manufacture  spread  to  Aragon 
and  other  Spanish  provinces.  But  wool  remained 
the  great  staple  of  manufacture.  By  that  time  the 
woollen  guild  was  importing  wool  from  England  and 
sending  back  shipments  of  finished  cloth  not  only  to 
Britain  but  also  to  many  other  countries.  Thus  the 
guild  was  forced  into  banking  operations  for  its  mem- 
bers as  early  as  1349.  An  agent  in  England  could 
pay  a  bill  there  with  a  draft  drawn  on  the  guild,  while 
the  guild  paper  was  generally  accepted  in  the  cities  of 
Spain  and  Italy. 

In  importing  wool  from  England  the  guild  acted 
as  buyer  for  its  various  members  and  in  disposing  of 
goods  abroad  exercised  a  similar  general  sales  func- 
tion. Members  could  also  borrow  from  the  guild 
when  necessary.  They  were  not  expected  to  pay 
interest  but  were  required  to  give  pledges  unless 
the  loan  was  so  small  that  their  ability  to  repay  was 
unquestioned. 

Throughout  western  Europe  there  were  riots 
against  the  Jews  toward  the  end  of  the  Fourteenth 
Century.  Superstitious  charges  that  the  Jews  had 
introduced  the  Black  Death,  or  pestilence,  which 
again  and  again  ravaged  the  most  populous  commu- 
nities, were  at  the  bottom  of  these  uprisings.  In  one 
such  riot  at  Barcelona,  in  1391,  the  Jewish  quarter 

[85] 


BANKING  THROUGH  THE  AGES 

was  virtually  wiped  out  and  many  Jewish  money 
lenders  were  driven  from  the  city. 

This  left  a  void  which  the  thriving  commerce  of 
the  city  compelled  the  citizens  to  fill.  Acting  on  the 
example  of  the  drapers'  guild  and  of  some  of  the 
Italian  cities,  the  municipality  thereupon  established 
the  Bank  of  Barcelona  as  an  official  institution. 

This  bank  received  deposits  and  served  as  a  me- 
dium of  exchange,  issuing  drafts  and  accepting 
drafts  drawn  upon  it.  Unlike  the  drapers'  guild  it 
was  open  to  every  one,  including  not  merely  the  cit- 
izens of  Barcelona  and  Aragon,  but  all  foreigners  as 
well.  Foreigners  were  no  doubt  admitted  to  help 
solve  the  problem  of  exchange  of  money  which  had 
become  almost  inextricably  complex.  Barcelona 
maintained  commercial  relations  with  Aragon,  Cas- 
tile, France,  Mohammedan  Spain,  Sicily  and  various 
cities  in  Italy  and  all  of  these  issued  distinctive  coin- 
ages of  their  own. 

Barcelona  always  remained  proud  of  her  position 
as  a  commercial  city  and  fostered  her  trade  and 
manufacture  in  every  way.  Business  there  was 
never  regarded  as  degrading  as  it  was  in  many  other 
Spanish  cities.  The  municipality  was  controlled  by 
the  council  which  was  itself  composed  of  representa- 
tives of  the  guilds,  as  in  Florence.  Indeed  instances 
are  recorded  of  some  of  the  lesser  nobles  renouncing 
their  rank  for  the  privilege  of  entering  a  guild  and 

[86] 


FINANCES  OF  BARCELONA 

thus  establishing  their  eligibility  for  municipal  offices. 

The  bank  was  under  the  general  supervision  of  the 
council  and  so,  indirectly,  under  the  control  of  the 
guild  members  whose  interests  it  served.  As  a  result 
of  this  close  business  relationship  the  bank  enjoyed 
a  long  and  prosperous  career. 

The  discovery  of  America,  which  changed  the 
course  of  commerce  throughout  the  world,  affected 
Barcelona  adversely  along  with  the  other  Mediter- 
ranean cities.  The  cities  of  the  Atlantic  coast  leaped 
into  sudden  importance  and  Barcelona,  though  it  re- 
mains an  important  industrial  centre  to  this  day, 
never  recovered  the  prestige  it  enjoyed  before  Co- 
lumbus ventured  across  the  western  ocean. 


[87] 


M' 


"TV  >(rONEY> the  life  blood  of  the  nation, 

Corrupts  and  stagnates  in  its  veins, 
Unless  a  proper  circulation 

Its  motion  and  its  heat  maintains." 

Dean  Swift. 


CHAPTER  IX 

BIRTH  OF  THE  ENGLISH  NATIONAL 

DEBT  AND  FOUNDING  OF  THE 

BANK  OF  ENGLAND 

THE  banker  of  to-day  should  find  it  a  curious 
and  interesting  diversion  to  consider  how 
much  he  owes  to  the  tyrants  of  the  past.  It 
is  a  commonplace,  in  all  nations  derived  from  English 
stock,  that  existing  political  and  legal  institutions 
represent  mainly  the  outgrowth  of  the  struggle  of 
popular  rights  against  the  absolutism  of  kings.  To 
an  extent  this  is  also  true  of  banking  and  currency,  as, 
for  instance,  the  issuance  of  bank-notes  backed  by  the 
national  governments. 

It  may  fairly  be  said  that  such  standard  features 
of  the  modern  banking  world  as  the  central  bank  of 
issue  and  the  national  debt  come  to  Americans  almost 
as  the  direct  fruit  of  the  Divine  Right  of  Kings,  as 
this  right  was  perversely  applied  by  two  Stuart  kings 
of  England,  Charles  I  and  Charles  II.  It  was  due 
primarily  to  the  lawlessness  and  corruption  of  the 
second  of  these  kings  that  England  created  a  national 
debt  and  a  central  bank  of  issue. 

The  astonishing  crudity  of  the  devices  which  served 

[89] 


BANKING  THROUGH  THE  AGES 

England  in  place  of  a  banking  system  in  the  Middle 
Ages — almost  incredible  to  the  modern  mind — made 
possible  the  forays  of  the  Stuart  kings ;  and  by  mak- 
ing these  raids  possible  drove  home  the  necessity  of 
regulating  the  financial  relations  between  the  Gov- 
ernment and  the  people  to  whom  the  Government 
looked  for  funds  with  which  to  carry  on. 

Charles  I  set  two  unfortunate  precedents  for  his 
immediate  successor  by  twice  losing  his  head.  The 
second  loss,  as  is  well  known,  was  fatal  to  Charles. 
The  first  was  when  he  raided  the  Exchequer  or  Gov- 
ernment Treasury  (then  housed  in  the  Tower  of 
London),  causing  a  loss  to  the  merchants  who  had 
deposited  their  money  there  to  the  amount  of  £120,- 
000.  This  was  the  precedent  which  the  second 
Charles  followed,  on  a  ten  times  larger  scale,  with 
results  probably  much  more  than  ten  times  as  far- 
reaching. 

In  the  careless  days  of  Charles  I  the  methods 
both  of  banking  and  of  taxation  were  crude  and 
confused.  For  nearly  five  hundred  years  before  his 
time  the  Mint  had  been  a  place  of  deposit  for  the 
merchants.  Because  of  the  worn  condition  of  the 
coins,  which  made  them  of  unequal  value,  the  officials 
weighed  each  man's  deposit  and  recorded  the  amount 
of  the  deposit  by  notches  on  a  stick,  which  afterwards 
served  as  ledger  and  pass-book.  According  to  Sir 
John  Lubbock,  president  of  the  Bankers'  Institute 

[90] 


o 

°  £ 
«  o 

K 
H 

W 

w 

Hi 

P 

P 


BIRTH  OF  ENGLISH  NATIONAL  DEBT 

of  London  in  1879,  it  was  not  until  1826  that  the  old 
wooden  tallies  entirely  passed  out  of  use  in  England. 
"The  tally,"  says  Sir  John,  "was  a  willow  stick  about 
five  feet  long,  an  inch  in  depth  and  thickness,  with 
the  four  sides  roughly  squared." 

The  amount  of  the  deposit  was  recorded  by  means 
of  notches  on  one  side  of  the  tally  stick,  and  a  descrip- 
tion inscribed  on  the  two  sides  adjoining  the  notched 
side.  The  tally  stick  was  then  split  in  half  through 
the  notches,  one  half  going  to  the  depositor,  the  other 
half  being  retained  by  the  bank  as  its  record. 

Cromwell,  who  sanctioned  the  beheading  of  Charles 
I,  and  who  ruled  England  as  "Protector,"  had  a 
hand  in  devising  the  effective  and  productive  system 
of  monthly  taxes  which  enabled  the  Parliamentary 
Government  to  get  through  periods  of  great  difficulty. 
This  new  system  was  largely  continued  under  the 
second  Charles. 

But  Cromwell,  like  the  king  before  him,  had  to 
take  in  his  pocket  Parliament's  authorization  for  a 
loan  and  dicker  with  the  money  lenders  when  in  need 
of  funds,  the  security  offered  being  repayment  out  of 
the  proceeds  of  the  authorized  tax-levy.  By  this  time 
the  former  money-lending  supremacy  of  the  Jews 
had  passed  to  the  goldsmiths  who  came  to  England 
from  Lombardy,  and  who  have  left  their  own  monu- 
ment in  modern  London  in  the  name  of  Lombard 
Street — the  Wall  Street  of  the  British  capital. 

[91] 


BANKING  THROUGH  THE  AGES 

Following  the  raid  of  Charles  I  on  the  Exchequer, 
the  confidence  of  the  merchants  in  government  de- 
positories began  to  weaken  and  they  gradually  turned 
to  the  goldsmiths'  strong  boxes  for  a  safer  depository 
for  their  funds.  On  short  time  deposits,  the  gold- 
smiths levied  a  small  charge  for  the  accommodation; 
but  they  paid  as  high  as  six  per  cent  interest  on  de- 
posits placed  with  them  definitely  for  a  year  or  more. 

The  charge  they  made  for  loans  to  the  Government 
was  generally  eight  per  cent,  leaving  for  themselves, 
as  bankers,  a  profit  of  two  per  cent. 

In  January,  1672,  when  the  Mint  contained  some 
.£1,328,000  of  bankers'  funds  advanced  to  the  Gov- 
ernment, Charles  II  acted  on  the  precedent  set  by 
his  father.  In  the  pay  of  the  King  of  France,  and 
conspiring  against  England's  safety,  he  had  promised 
by  way  of  repayment  to  produce  a  war  between  Eng- 
land and  Holland.  Like  many  another  spendthrift 
he  ran  out  of  funds  and,  losing  his  head  almost  as  com- 
pletely as  his  father  had  done,  executed  his  most 
lamentable  raid  upon  the  Mint,  seized  the  funds,  and 
closed  the  Exchequer,  prohibiting  its  reopening  in 
order  to  prevent  the  merchants  from  cashing  their 
tallies.  This  famous  raid  has  been  known  in  history 
ever  since  as  "The  Stop  of  the  Exchequer." 

This  seizure  proved  to  be  a  serious  matter  for  all 
concerned.  The  money,  though  advanced  by  the 
bankers  to  the  Government,  represented  the  fortunes 

[92] 


BIRTH  OF  ENGLISH  NATIONAL  DEBT 

of  some  ten  thousand  individuals  who  had  entrusted 
their  funds  to  the  goldsmiths.  The  bankruptcy  and 
ruin  which  followed  Charles'  raid  was  therefore  wide- 
spread, and  so  disastrous  that  an  attempt  was  made  at 
partial  reparation, — an  attempt  which  resulted  in  the 
birth  of  the  national  debt  of  England.  Charles,  in 
his  proclamation  closing  the  Exchequer,  declared  that 
the  money  he  had  taken  would  be  retained  for  only  a 
year,  but  this  promise,  like  most  he  made,  was  not 
kept.  The  Government  paid  six  per  cent  interest  on 
the  seized  funds  for  six  years,  from  1677  to  1683, 
after  which  all  interest  payments  ceased.  No  interest 
was  paid  during  the  following  short  reign  of  James 
II,  and  it  was  not  until  another  revolution  had  put 
William  of  Orange  on  the  British  throne  that  real 
reparation  came  into  sight. 

An  attempt  by  the  Government's  creditors  to  get 
restitution  by  action  through  the  courts  at  first  came 
to  nothing  since  it  was  ruled  that  Charles  II,  and  not 
the  Government  headed  by  William,  had  made  the 
seizure.  Years  later  the  House  of  Lords  upset  the 
court  decision  and  partial  restitution  was  made. 

Before  the  end  of  the  litigation  was  in  sight  a  plan 
of  settlement,  based  on  the  creation  of  a  regular  Gov- 
ernment debt  and  a  bank  of  issue,  was  put  before 
Parliament  by  an  obscure  Scotchman  named  William 
Patterson,  who  was  backed  in  his  efforts  by  a  number 
of  rich  London  merchants.     Taking  advantage  of 

[93] 


BANKING  THROUGH  THE  AGES 

the  Government's  need  for  money,  Patterson,  in 
1692,  offered  a  plan  whereby  the  creditors  or  their 
assignees  would  forego  the  interest  on  £1,340,000 
owed  them,  and  would  advance  another  sum  equal  to 
their  principal  if  six  per  cent  should  be  secured  by 
act  of  Parliament,  and  the  bills  of  the  company  be 
made  legal  tender  up  to  the  total  amount.  Parlia- 
ment objected  to  the  legal  tender  feature  and  nothing 
was  concluded  for  a  year  or  more. 

The  plan  was  revived,  however,  by  Charles  Mon- 
tagu, Lord  of  the  Treasury,  who  sent  for  Patterson, 
to  whose  assistance  later  came  the  astute  Michael 
Godfrey.  A  loan  to  the  Government  of  £2,000,000 
at  seven  per  cent  interest  was  contemplated  at  this 
meeting,  but  the  low  rate  of  interest  seemed  so  pre- 
posterous to  royal  ministers  accustomed  to  waste 
nearly  half  the  proceeds  of  a  loan  in  extravagant  com- 
missions, that  they  turned  from  Patterson's  plan  to 
other  ways  and  means. 

Two  years  later  the  Patterson-Godfrey  plan,  re- 
vised, was  carried  through  a  scantily  attended  session 
of  Parliament  as  a  rider  to  the  Ways  and  Means  Bill. 
It  emerged  May  4,  1694,  as  the  charter  of  "The 
Governor  and  Company  of  the  Bank  of  England." 
Under  the  terms  of  this  charter  the  company  was  al- 
lowed to  lend  the  Government  £1,200,000,  was  au- 
thorized to  issue  notes,  deal  in  bullion,  and  to  make 
advances  on  merchandise.     Because  the  bill  to  which 

[94] 


ENGLISH    OFFICERS    RECEIVING    AND    WEIGHING    COIN 
AT    THE    EXCHEQUER,    A.D.   1130 — 1174 


BIRTH  OF  ENGLISH  NATIONAL  DEBT 

the  Bank  rider  was  attached  levied  tunnage  duties, 
the  Bank  itself  was  long  known  as  "The  Tunnage 
Bank." 

Thus  England  acquired  a  national  debt  and  a 
central  bank  of  issue — unforeseeable  fruits  of  the 
tyranny  of  the  Stuart  kings. 


[95] 


**^"^l  ET  all  you  can  without  hurting  your  soul, 
^JT  your  body,  or  your  neighbor.  Save  all 
you  can,  cutting  off  every  needless  expense. 
Give  all  you  can.  Be  glad  to  give,  and  ready  to 
distribute;  laying  up  in  store  for  yourselves  a 
good  foundation  against  the  time  to  come,  that  ye 
may  attain  eternal  life." 

John  Wesley. 


CHAPTER  X 

THE  AMSTERDAM  BOURSE  IN  THE 
SEVENTEENTH  CENTURY 

N  August  14,  1597  the  somewhat  sedate 
streets  of  Amsterdam  suddenly  began  to 
echo  to  the  sound  of  bells  ringing  in  mad 
excitement.  In  no  time  at  all  a  crowd  of  burghers 
had  gathered  at  the  waterfront,  overjoyed  at  the 
spectacle  they  witnessed  there.  Four  Dutch  ships, 
absent  more  than  two  years,  had  returned  trium- 
phantly from  the  Spice  Islands  of  the  far-away 
Indies. 

But  there  was  a  sober  note  in  the  triumph.  The 
little  fleet,  backed  largely  by  the  money  of  the  local 
merchants,  had  set  out  manned  by  two  hundred  and 
fifty  men.  Only  ninety-four  of  them  came  back, 
and  these  after  incredible  hardships.  But  they  had 
successfully  defied  the  power  of  Spain  which,  in  clos- 
ing the  ports  of  her  then  dependency,  Portugal,  to  all 
Dutch  traders,  had  threatened  the  very  existence  of 
the  mercantile  navy  of  the  Netherlands. 

That  memorable  voyage  marked  the  metamor- 
phosis of  the  Dutch  from  European  into  World 
traders.     From  various  ports  of  Zeeland  and  Hoi- 

[97] 


BANKING  THROUGH  THE  AGES 

land  eighty  vessels  sailed  the  following  year  to 
America,  Africa  and  India.  In  1602  the  celebrated 
Dutch  East  India  Company  was  organized  under  a 
charter  granted  by  the  States-General  with  a  sub- 
scribed capital  of  6,000,000  guilders.  Within  six 
years  this  company  sent  out  forty-six  ships  armed  for 
war,  if  necessary,  and  as  thoroughly  equipped  for 
trade.  Holland  had  begun  to  take  her  position  as  a 
world  power. 

Commerce,  developing  so  rapidly,  was  naturally 
in  confusion.  Amsterdam,  long  a  city  of  import- 
ance, had  suddenly  grown  to  be  a  great  centre  of 
international  trade.  It  was  overrun  with  foreigners. 
Its  imports  and  exports  reached  staggering  figures. 
Indeed,  it  was  the  main  transfer  port  between  north 
and  south. 

The  money  current  in  the  city  flowed  in  from  many 
lands.  It  was  worn  with  constant  use  and  where  it 
had  not  lost  weight  from  long  service  it  was  clipped 
by  sharpers.  The  bulk  of  it  was  worth  from  ten  to 
fifteen  per  cent  less  than  the  new  coinage  from  the 
mint.  This  was  one  of  the  potent  reasons  which  led 
to  the  establishment  of  the  Bank  of  Amsterdam.  It 
was  also  urgently  necessary  to  ease  the  payment  of 
foreign  bills  of  exchange  and  most  of  the  merchants 
also  desired  to  avoid  the  inconvenience  of  making 
their  payments  in  actual  coin. 

Therefore  in  1609  the  city  itself  established  the 

[98] 


H 

o 

W 
H 

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W 

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CO 

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ffl 

< 

M 

H 

Cfl 

W 

W 

H 


THE  AMSTERDAM  BOURSE 

bank.  It  belonged  to  the  city,  its  credit  was  guarded 
by  the  city,  the  cost  of  management  was  undertaken 
by  the  city  and  if  there  were  any  profits  they  accrued 
to  the  city.  At  a  glance,  this  has  the  look  of  an  ad- 
vanced enterprise  in  municipal  ownership. 

Yet  the  old  Bank  of  Amsterdam  is  of  peculiar  in- 
terest to-day  because  it  was  in  many  ways  so  primitive 
and  because  it  was  based  on  principles  so  different 
from  those  which  regulate  modern  banks.  Its  de- 
posits, for  example,  were  presumed  always  to  be 
equal  to  its  liabilities.  It  was  not  intended  as  a  loan 
bank  at  all  but  as  a  convenience  in  commercial  ex- 
change. 

The  institution  accepted  foreign  and  domestic  coin 
at  its  actual  value  by  weight  and  fineness.  This  was 
credited  on  the  books  and  the  depositor  was  given 
both  a  credit  slip  and  a  receipt  for  the  coin  each  of 
which  was  used  independently  as  commercial  paper. 
Gold  and  silver  bullion  was  received  on  the  same 
basis.  Both  coin  and  bullion,  however,  were  credited 
at  about  five  per  cent  below  the  mint  value. 

The  bank  exacted  an  additional  charge  for  the 
storage  of  bullion  if  it  remained  in  the  vaults  more 
than  six  months.  For  gold  this  charge  was  one  half 
of  one  per  cent  and  for  silver  one  quarter  of  one  per 
cent.  It  was  considered  more  difficult  to  test  the 
fineness  of  gold  and  the  risk  involved  in  guarding  it 
was  held  to  be  greater.     If  coin  was  left  in  the  bank 

T991 


BANKING  THROUGH  THE  AGES 

for  a  period  beyond  six  months  the  same  charge  as 
that  for  silver  bullion  was  required.  Obviously,  a 
considerable  part  of  the  bank's  income  was  derived 
from  these  charges,  though  the  canny  founders  had 
not  neglected  other  sources  of  profit. 

Under  the  law  all  monies  received  and  paid, 
amounting  to  more  than  600  guilders,  had  to  be 
cleared  through  the  bank  and  this  limit  was  later 
reduced  to  300  guilders.  Bills  of  exchange,  to  be 
legal,  had  likewise  to  be  paid  through  the  bank. 
The  law  was  framed  to  prevent  fraud,  to  provide 
legal  records  and  to  assure  safety  in  the  handling  of 
funds. 

Perhaps  it  was  merely  an  incidental  consideration 
that  the  business  of  the  bank  would  be  enormously 
extended.  However,  for  each  of  these  multitudinous 
transactions  the  institution  received  not  less  than  two 
stivers,  or  four  cents.  If  the  transfer  fell  below  300 
guilders  the  charge  was  tripled.  The  results  were  as 
profitable  as  a  government  stamp  tax  on  all  commer- 
cial paper. 

Another  source  of  profit  lay  in  the  multiplication 
of  accounts.  Every  new  depositor  was  charged  ten 
guilders,  or  four  dollars,  and  every  new  account 
started  by  him  yielded  another  three  guilders.  Each 
deposit  was  regarded  as  a  separate  account  and  might 
be  negotiated  from  merchant  to  merchant  for  many 
years.     Under  the  Dutch  system  the  deposit  was  the 

[100] 


OEN     BAM,  V*L»    VQCANT. 


THE  FORUM,   AMSTERDAM EARLY  EIGHTEENTH   CENTURY 


THE  AMSTERDAM  BOURSE 

unit  whereas  to-day  the  individual  is  usually  regarded 
as  the  unit. 

Certain  specific  penalties  enforced  by  the  man- 
agement also  added  to  the  profit  of  the  bank. 

If  bullion  was  not  withdrawn  within  six  months 
after  the  deposit,  or  if  a  new  storage  charge  was  not 
paid,  it  was  supposed  to  revert  to  the  bank.  As  a 
matter  of  fact  bullion  was  seldom  forfeited  and  stor- 
age payments  on  it  often  ran  over  long  periods.  If 
a  depositor  failed  to  balance  his  account  every  six 
months  he  was  fined  twenty-five  guilders,  or  ten  dol- 
lars. 

The  profits  of  the  bank,  though  substantial,  varied 
enormously  from  year  to  year.  The  exact  figures 
were  kept  secret.  But  according  to  old  city  records 
of  income  the  profits  ran  anywhere  from  25,000  to 
300,000  guilders,  and  might  jump  or  drop  as  much 
as  100,000  guilders  from  one  year  to  the  next. 
Nevertheless,  this  was  doing  very  well  as  the  bank 
was  supposed  to  make  no  loans  to  individuals  and 
had  not  that  profitable  field  to  exploit. 

The  Bank  of  Amsterdam  was  under  the  direction 
of  the  four  ruling  burgomasters  of  the  city,  who  were 
changed  each  year.  Every  year  just  before  the  bank 
was  handed  over  to  the  new  burgomasters  a  balance 
was  struck  and  the  transfer  was  attended  by  solemn 
ceremonies.  However,  the  actual  figures  were  not 
made  public. 

[101] 


BANKING  THROUGH  THE  AGES 

In  1672,  when  Louis  XIV  captured  Utrecht  there 
was  a  run  on  the  bank  but  it  met  all  demands 
promptly.  Some  of  the  coin  paid  out  at  that  time 
had  evidently  been  lying  in  the  vaults  of  the  bank 
since  it  had  been  founded. 

Yet  perhaps  even  then  all  was  not  as  serene  as  it 
seemed.  Or  possibly  the  following  century  devel- 
oped a  looser  management.  At  all  events  when  the 
French  captured  Amsterdam  in  1795  and  seized  the 
bank  a  balance  was  taken  which  revealed  that  the 
deposits  were  far  below  what  the  receipt  book  called 
for.  It  developed  that  money  had  been  loaned  to 
Holland,  West  Friesland,  the  City  of  Amsterdam 
and  the  Dutch  East  India  Company.  How  these 
loans  could  have  been  kept  secret  from  one  adminis- 
tration to  another,  with  the  four  burgomasters 
changed  every  year,  and  in  the  midst  of  bitter  party 
politics,  is  a  mystery.  It  must  be  assumed  that  the 
true  condition  of  the  bank  was  considered  a  state 
secret  outside  the  realm  of  internal  politics. 

Though  the  city  managed  to  pay  the  depositors  in 
full  before  1802  these  revelations  had  hopelessly 
ruined  the  credit  of  the  bank  and  it  soon  ceased  to 
exist.  Through  other  means,  however,  Amsterdam 
managed  to  maintain  her  financial  supremacy  until 
it  passed  to  London  during  the  Napoleonic  wars. 


[102] 


NATHAN    ROTHSCHILD 
Founder  of  the  Famous  House  of  The  Rothschilds. 


CHAPTER  XI 

RISE  OF  THE  ROTHSCHILDS 

LOST  in  the  obscurity  of  the  humble,  somewhere 
in  the  second  quarter  of  the  "excellent,  indis- 
pensable Eighteenth  Century,"  a  Jewish  ped- 
lar, Amschel  Moses  Bauer,  decided  to  settle  down  at 
Frankfort,  Germany.  He  had  hawked  his  goods 
about  at  Hanover  and  countless  country  fairs  and  he 
was  tired. 

The  restlessness  that  was  already  in  men's  minds, 
and  was  later  to  set  all  Europe  in  flames,  had  not  yet 
ripened.  Bauer  opened  a  little  shop  in  the  Juden- 
strasse.  Over  his  door,  as  a  sign,  he  swung  a  red 
shield.  From  that  house,  named  from  that  modest 
shield,  sprang  the  greatest  firm  of  international 
bankers  of  the  next  century — until  our  own  day  the 
most  powerful  family  of  money  lenders  the  world  has 
known. 

Bauer  had  a  son,  Maier  Amschel,  the  apple  of  his 
eye.  Maier  was  a  smart  boy,  and  studious.  His 
father,  in  a  wild  flight  of  ambition,  decided  to  make 
him  a  rabbi  and  sent  him  to  the  Talmud  school  at 
Furth.  But  in  1754,  when  Maier  was  only  eleven 
years  old,  Moses  Bauer  died.  The  boy  had  to  go  to 
work.     Eventually  he  managed  to  get  a  clerkship  in 

[103] 


BANKING  THROUGH  THE  AGES 

the  Oppenheimer  bank  at  Hanover  and  after  a  num- 
ber of  years  became  a  junior  partner.  Yet  his  mind 
turned  back  to  Frankfort.  Returning,  he  set  up 
there  as  a  banker  in  his  own  right.  As  a  filial  gesture 
he  bought  the  little  house  with  the  red  shield  and  as- 
sumed the  name  "red  shield"  himself — the  first  of 
the  Rothschilds. 

As  a  boy  at  Furth,  Maier  had  developed  an  in- 
terest in  ancient  coins  and  medals.  As  a  banker  he 
made  this  interest  rather  a  hobby.  This  hobby  re- 
sulted in  a  contact  which  influenced  his  own  fortune 
and  that  of  many  others. 

Chief  of  the  local  connoisseurs  was  William,  Land- 
grave of  Hanau,  afterward  Elector  of  Hesse  Cassel. 
In  1785  the  Landgrave  and  General  Estorff  were 
disputing  the  origin  of  an  old  coin  when  the  General 
suggested  Rothschild  as  an  expert. 

Arriving  on  summons,  Maier  found  the  two  at 
chess. 

"Do  you  play?"  the  Landgrave  condescended  to 
ask. 

"A  little,"  responded  Rothschild.  "And  if  I  may 
suggest  this  move  your  highness  will  win  the  game  in 
three  moves." 

So  it  turned  out.  A  decidedly  tactful  suggestion. 
The  victorious  Landgrave  turned  to  his  friend. 
"General,"  he  announced,  "This  is  certainly  no  fool 
you  have  brought  me!" 

[104] 


COAT    OF    ARMS    OF    THE   ROTHSCHILDS, 

WHICH    INCLUDES    THE     ORIGINAL 

RED    SHIELD    IN    THE    CENTER 


RISE  OF  THE  ROTHSCHILDS 

And  he,  in  his  turn,  was  right.  From  time  to  time 
Maier  Rothschild  bought  rare  coins  for  the  Land- 
grave and  negotiated  bills  on  London.  Like  his 
predecessors,  Rothschild's  patron  was  virtually  sell- 
ing soldiers  to  Great  Britain.  In  1787,  for  example, 
he  forwarded  12,000  men  and  received  £80,000  for 
their  services.  Thus  he  became  one  of  the  richest  men 
in  Europe,  often  having  as  much  as  half  a  million 
pounds  in  his  vaults  at  Cassel,  besides  substantial 
deposits  in  London  and  Amsterdam.  Naturally, 
this  profitable  practice  made  him  the  enemy  of  France 
and  when  Napoleon  crossed  the  Rhine  he  was  com- 
pelled to  flee.  But  he  had  developed  a  firm  faith  in 
the  integrity  and  shrewdness  of  Rothschild  and  left 
most  of  his  wealth  with  him.  The  latter  hid  £250,- 
000  in  the  cellar  and  sent  much  more  than  that  to  his 
son  Nathan,  in  London. 

This  Nathan  was  not  merely  the  third  of  Maier's 
five  sons.  He  was  the  greatest  financial  genius  of 
his  generation.  He  was  born  in  1777  and  when  he 
came  of  age  went  to  England.  Manchester  attracted 
him  because  he  saw  how  three  profits  could  be  made 
in  the  cotton  trade.  There,  by  supplying  both 
materials  and  dyes  and  selling  the  finished  product, 
he  expanded  his  capital  from  £20,000  to  £60,000. 

By  1800  he  was  rich  enough  to  set  up  as  a  London 
banker.  Through  his  father  he  became  within  a  year 
the  purchasing  agent  for  the  Landgrave.     Within 

[105] 


BANKING  THROUGH  THE  AGES 

six  years  he  had  attracted  considerable  attention  in 
the  financial  world  by  engineering  a  loan  of  10,000,- 

000  thalers  to  Denmark.  Indeed,  so  important  was 
this  loan,  that  Amsterdam  never  recovered  the  pres- 
tige in  financial  affairs  which  London,  through  Roths- 
child, had  wrested  from  her. 

Naturally,  then,  when  the  Landgrave  fled,  his 
funds  went  to  Nathan  for  safe-keeping.  Nathan  in- 
vested them  shrewdly  and  when  the  time  came  to  make 
return  added  five  per  cent  interest.  The  Landgrave, 
astonished  and  delighted,  became  the  firm's  greatest 
advertiser,  shouting  praises  of  the  House  of  Roths- 
child throughout  the  courts  of  Europe. 

England  was  now  at  death  grips  with  Napoleon. 
Sir  Arthur  Wellesley,  later  Duke  of  Wellington, 
fighting  the  power  of  France  in  the  Spanish  penin- 
sula, had  drawn  numerous  orders  on  the  treasury 
which  it  could  not  pay  and  which  were  consequently 
selling  at  a  big  discount.  Nathan  Rothschild  had 
always  believed  in  the  ultimate  defeat  of  Napoleon. 
Acting  on  that  faith,  in  1809  he  bought  up  many  of 
these  orders  and  held  them  as  an  investment.  It  was 
Wellington  himself  who  later  said:     "Rothschild  and 

1  owe  something  of  our  .success  to  knowing  what  is 
doing  on  the  other  side  of  the  wall." 

Meanwhile  Rothschild  learned  that  the  East  India 
Company  wished  to  sell  100,000  pounds  of  gold  bul- 
lion.    This  he  bought,  confident  that  it  would  soon  be 

[106] 


RISE  OF  THE  ROTHSCHILDS 

needed  by  the  government.  His  guess  was  correct. 
Soon  after,  the  government  sent  for  him  and  bought 
his  gold  to  send  to  Wellesley,  who  was  desperately  in 
need  of  cash  for  his  army  in  Portugal.  Rothschild 
himself  undertook  to  deliver  it  for  the  sake,  as  he 
afterward  said,  of  the  extra  profit.  Not  only  did  he 
deliver  the  gold  to  Wellesley  but  he  sent  it  boldly 
through  France,  the  country  of  the  enemy. 

By  this  time  Wellesley's  treasury  orders  had  been 
discounted  in  Portugal  and  Italy  and,  in  fact,  were 
scattered  all  over  the  continent.  By  1813  Rothschild 
had  traced  most  of  these  down  and  purchased  them 
for  about  <£700,000.  Of  course  it  was  necessary  that 
this  be  done  quietly  so  as  not  to  disturb  prices,  but 
Rothschild  managed  the  deal  without  exciting  a  rip- 
ple. 

When  two  years  later  Napoleon  returned  from 
Elba,  England  faced  another  and  her  greatest  crisis. 

If  Napoleon  triumphed  Rothschild  was  ruined. 
But  as  usual  he  was  in  a  strategic  position.  Adolphe 
Thiers,  the  French  statesman  and  financier,  tells  the 
story  of  what  happened. 

Rothschild  was  at  Ghent.  In  the  next  house  to  his 
was  Louis  XVIII  of  France,  driven  into  exile  by 
Napoleon  and  now  waiting  the  issue  of  the  field  of 
Waterloo.  Through  his  window  Rothschild  could 
see  what  was  taking  place  in  the  hall  of  the  King  next 
door.     The  only  news  of  the  battle  of  Waterloo  that 

[107] 


BANKING  THROUGH  THE  AGES 

had  yet  penetrated  to  the  outside  world  was  that 
Blucher  had  heen  defeated.  Yet  the  watching  banker 
saw  a  messenger  from  the  battlefield  enter  the  King's 
presence  and  kneel  as  though  to  a  reigning  sovereign. 

This  was  enough  for  Rothschild.  He  felt  sure 
Napoleon  was  defeated.  He  started  post  haste  for 
London.  Reaching  Ostend  he  found  a  furious  storm 
driving  across  the  Channel.  Still  gambling  with  f  ate, 
he  paid  a  sailor  2,000  francs  in  advance  to  land  him 
safely  in  England.  In  the  morning  he  was  able  to 
take  his  place  in  the  London  stock  exchange.  None 
knew  what  he  knew.  What  tidings  the  city  had  from 
Waterloo  were  bad.  Consols  were  selling  at  bargain 
prices.  Rothschild  bought  all  he  could  lay  his  hands 
on.  When  the  nation  finally  learned  of  Welling- 
ton's decisive  victory  the  banker's  profits  amounted 
to  £1,000,000. 

Again  and  again  Rothschild  profited  by  his  ap- 
preciation of  the  value  of  news.  He  had  carrier 
pigeons  trained  to  bring  him  the  latest  tidings  from 
Europe  and  used  clipper  ships  to  outrun  the  ordinary 
channels  of  intelligence  of  his  time.  Once  he  had  the 
news,  his  own  extraordinary  judgment  equipped  him 
to  meet  and  best  any  competitor. 

Rothschild  preferred  lending  money  to  states 
rather  than  to  individuals.  In  time  he  became  the 
fiscal  agent  of  virtually  every  civilized  government  on 
the  globe,  with  the  exception  of  Spain  and  the  United 

[108] 


RISE  OF  THE  ROTHSCHILDS 

States,  from  which  countries  he  consistently  declined 
all  contracts.  His  house  advanced  £18,000,000  to 
states  at  war  with  Napoleon  and  about  £5,000,000 
to  Prussia  after  peace  had  been  declared. 

All  Nathan's  four  brothers  were  able  bankers  and 
the  firm  functioned  throughout  Europe.  When 
Nathan  died  in  1836  the  family  rested  at  the  apex  of 
the  financial  structure  of  the  world.  His  son  Lionel 
was  elected  to  Parliament  but  firmly  refused  to  take 
his  seat  until  the  disabilities  against  Jews  had  been 
removed.  Honours  and  titles  descended  upon  the 
House  of  Rothschild  and  to  this  day  it  has  continued 
one  of  the  great  financial  powers  of  Europe.  But 
always  the  central  office  of  the  firm  has  been  main- 
tained at  Frankfort,  where  it  began  in  the  House  of 
the  Red  Shield. 


[109] 


^TTTT  OW  a  man  uses  money — makes  it,  saves 
II  II  it,  and  spends  it — is  perhaps  one  of  the 
best  tests  of  practical  wisdom.  Although  money 
ought  by  no  means  to  be  regarded  as  a  chief  end 
of  man's  life,  neither  is  it  a  trifling  matter  to  be 
held  in  philosophic  contempt,  representing  as  it 
does  to  so  large  an  extent,  the  means  of  physical 
comfort  and  social  well-being." 

S.  Smiles. 


CHAPTER  XII 

DEVELOPMENT  OF  BANKING  IN 
THE  LAND  OF  THE  VIKINGS 

POPULAR  misconception  of  a  name  and  the 
very  real  tradition  of  terror  they  left  on  the 
coasts  of  their  visitation  have  combined  to 
create  a  false  notion  of  the  Vikings.  Literature  has 
insisted  on  regarding  them  as  scions  of  a  wild  north- 
ern royalty,  corsairs  certainly  and  perhaps  savage 
princelings.  As  a  matter  of  fact  they  were  not  Vi- 
kings at  all,  but  merely  Vik-ings — "men  of  the  in- 
lets," or  fjords. 

As  most  of  the  records  we  have  access  to  were  com- 
piled by  their  Christian  and  fear-shaken  enemies  the 
extremely  courageous  yet  pagan  Vikings  loom  in 
history  chiefly  as  the  deadly  scourge  of  that  first, 
feeble  feudalism  which  was  struggling  to  revive  some 
spark  of  civilization  from  the  ashes  of  the  Roman 
Empire.  Issuing  from  their  long  boats,  those 
dragon  ships  which  were  a  sign  of  peril  wherever 
their  sails  rose  above  the  horizon,  they  did  harry  Eng- 
land, Ireland,  France,  Spain  and  even  the  coast  of 
Italy,  leaving  waste  and  destruction  where  they  did 
not  actually  kill  and  colonize. 

[Ill] 


BANKING  THROUGH  THE  AGES 

But  the  Vikings  were  much  more  than  pirates. 
At  the  height  of  their  vigour  their  governance  em- 
braced the  whole  northern  top  of  the  world,  from 
North  America  which  they  discovered  and,  in  some 
sense  settled,  hundreds  of  years  before  Columbus 
was  born,  to  the  steppes  of  Russia  where  Rurik,  a 
Norseman,  is  the  first  great  historical  figure.  There 
is  reason  to  believe  the  Norsemen  sailed  up  the  Great 
Lakes  in  America  and  penetrated  as  far  as  Minnesota. 
In  Russia,  on  the  other  wing  of  their  far  flung  ex- 
ploration, Novgorod  is  merely  the  Norse  name  for 
"new  fort." 

All  this  implies  a  tremendous  maritime  energy  and 
an  enormous  extension  of  trade,  for  with  the  Norse- 
men trade  was  a  foster  sister  of  the  sword.  They 
were  a  congeries  of  peoples  rather  than  a  nation  and 
in  the  early  mediaeval  world  some  impulse,  the  cause 
of  which  we  do  not  know,  inspired  them  with  a  cosmic 
restlessness  which  brought  successive  eruptions  of 
their  fleets  against  the  coastwise  monasteries  of 
France  and  England  and  carried  them  up  the  Baltic 
and  across  the  North  Atlantic.  It  is  said  that  the 
first  idea  of  galleys  came  to  them  from  the  Romans, 
but  the  Romans  never  proved  half  so  venturesome. 

Often  making  their  first  approach  as  traders  they 
would  return  as  raiders  and  finally  as  conquerors. 
Thus  they  came  again  and  again  to  the  shores  of 
France  and,  sailing  up  the  Seine,  at  last  besieged 

[112] 


BANKING  IN  THE  LAND  OF  VIKINGS 

Paris.  To  shake  them  off  it  was  necessary  to  cede 
them  the  whole  province  of  Neustria  which  then  be- 
came Normandy.  These  Normans,  or  Norsemen, 
learned  to  speak  French  and  within  a  century  con- 
quered England,  settled  by  earlier  Norsemen  (An- 
gles and  Saxons)  who  had  been  fighting  vigorously, 
but  only  half  successfully,  to  keep  out  their  Norse 
kindred,  the  Danes. 

Throughout  all  this  fierce  ferment  the  Norsemen, 
or  at  least  that  branch  of  the  race  which  called  them- 
selves Swedes,  had  maintained  the  city  of  Visby,  on 
the  island  of  Gottland,  as  their  chief  commercial  cen- 
tre. Visby,  which  retains  to-day  some  of  the  most 
interesting  mediaeval  remains  in  Europe,  is  believed 
to  have  been  one  of  the  most  ancient  trading  centres 
in  the  world.  There  are  indications  that  it  was  a  post 
of  exchange  even  in  the  Stone  Age  when  bronze  was 
just  being  introduced  from  the  valley  of  the  Mediter- 
ranean. Old  Arabic  and  even  Chinese  coins  dug  up 
there  suggest  the  almost  incredible  spread  of  early 
Norse  commerce. 

As  the  Vikings  became  Christianized  Visby  pros- 
pered and  developed  as  a  thriving  commercial  repub- 
lic, sending  expeditions  eastward  into  Russia  and 
south  through  Europe.  The  whole  fur  trade  of  the 
north  centred  in  the  city  and  pelts  were  exchanged 
for  the  various  wares  of  more  luxurious  civilizations. 

Russia,  first  developed  by  the  Norsemen,  was  a 

[113] 


BANKING  THROUGH  THE  AGES 

great  field  for  their  exploitation.  But  after  the  con- 
quest of  Russia  by  the  Mongols  the  trade  of  Visby 
was  considerably  impaired.  It  also  suffered  through 
the  rivalry  of  other  Hanseatic  towns,  which  won  away 
much  of  its  southern  trade.  Finally  it  was  raided 
by  King  Valdemar  Atterdag  of  Denmark  in  1361 
and  never  afterward  managed  to  recover  its  prestige. 

Even  in  those  early  days  furs  were  so  much  desired 
that  enormous  prices  were  paid  for  them.  Never- 
theless silver  and  gold  were  scarcely  known  in  the 
north  and  the  currency  was  copper.  In  large 
amounts  copper  was  heavy  and  cumbersome.  For 
this  reason  there  developed  in  Visby  a  system  of 
written  orders  for  the  payment  of  goods  which  cor- 
responded somewhat  to  drafts  or  checks,  except  that 
they  were  based  on  furs  rather  than  on  specie. 

As  Visby  declined  Stockholm  became  the  chief 
Swedish  commercial  centre.  Trade  there  was  fos- 
tered by  the  Hansa  towns  of  Germany,  but  their 
privileges  gradually  became  so  oppressive  that  they 
were  set  aside  by  Gustavus  Vasa.  Vasa  evinced  a 
keen  interest  in  the  extension  of  trade  and  endeav- 
oured to  secure  business  both  in  Russia  and  with  the 
German  cities. 

Charles  XI  of  Sweden  divided  the  communities 
into  inland  and  staple  towns.  These  latter  were 
centres  for  the  export  of  certain  staple  products,  and 

[114] 


COINING    OR    STAMPING    COPPER    MONEY    IN 
SWEDEN    IN    MEDIEVAL    TIMES 


BANKING  IN  THE  LAND  OF  VIKINGS 

it  might  be  that  a  town  would  export  but  one  staple 
and  thus  be  known  particularly  for  that  product. 

Gustavus  Adolphus,  that  great  commander,  found 
time  between  his  campaigns  to  encourage  commerce 
and  business  and  is  reported  to  have  said:  "The 
Kingdom's  welfare  depends  on  commerce  and  ship- 
ping." 

The  first  chartered  public  bank  in  Sweden  was 
founded  in  1656.  An  excellent  account  of  this  is 
given  in  the  report  to  Lord  Chancellor  Hardwicke 
which  has  never  been  published  but  is  treasured  in 
manuscript  by  the  New  York  Public  Library. 

Sole  rights  for  the  institution  were  given  to  John 
Palmstruch,  head  of  the  merchants  guild  and  a  prom- 
inent miner.  The  only  capital  required  was  what- 
ever cash  Palmstruch  might  have  had  and  the  credit  of 
his  various  mines.  The  bank  was  divided  into  two  de- 
partments,— the  deposit  branch  which  could  make  no 
loans,  and  the  loan  department  which  was  permitted 
to  lend  money  on  real  estate  and  commodities. 
Within  two  years  the  bank  was  issuing  notes  payable 
on  demand,  some  to  order  and  some  to  bearer. 
These  were  probably  the  first  standard-sized  payable- 
on-demand  bank  bills  ever  issued. 

The  loans  of  the  Palmstruch  bank  were  legally 
limited  to  one  year  and  six  weeks.  The  six  weeks 
was  perhaps  time  added  to  the  regular  term  to  per- 

[115] 


BANKING  THROUGH  THE  AGES 

mit  making  a  readjustment.  The  loans  were  al- 
lowed from  six  to  ten  per  cent  interest  and  as  long 
as  the  interest  was  paid  that  was  sufficient  to  prevent 
the  calling  of  the  loan.  There  was  also  a  charge  for 
the  transportation  and  storage  of  securities. 

It  seems  strange  that  even  at  that  time  the  coinage 
of  Sweden  was  based  on  copper.  As  the  value  of 
copper  continued  to  rise  the  issuing  of  bank  notes 
became  a  losing  venture.  Another  source  of  loss  to 
the  bank  was  through  the  extensive  forging  of  notes. 

At  all  events  the  issue  of  bills  soon  exceeded  the 
available  funds  and  during  the  panic  of  1664  the  bank 
ceased  to  redeem  them  and  they  dropped  in  value 
even  though  they  were  made  legal  tender  by  law. 
In  an  effort  to  remedy  this  situation  silver  currency 
was  introduced. 

Palmstruch  himself  was  subjected  to  considerable 
criticism  for  intermingling  the  two  departments  of 
loan  and  exchange.  The  King,  however,  retained 
full  confidence  in  him.  He  was  allowed  a  substan- 
tial profit  on  the  coinage  of  500,000  hundred-weight 
of  copper,  received  other  presents  and  marks  of  es- 
teem and  was  finally  made  a  noble  of  the  kingdom. 

In  1668  the  affairs  of  Palmstruch's  bank  was  par- 
tially liquidated  and  it  was  merged  into  the  new  Riks- 
bank,  or  Bank  of  Sweden.  Like  the  earlier  institu- 
tion this  also  had  two  departments,  one  for  loans  and 
one  for  bills  of  exchange.     The  loan  department 

[116] 


THE    STOCKHOLM    BOURSE    IN    THE    MIDDLE     OF    THE 
EIGHTEENTH      CENTURY 

This  building  was  the  Banking  Headquarters  in  Stockholm  in 
1782  and  today  houses  one  of  the  oldest  Stock  Exchanges  in  the 
world.     While  the  exterior  has  not  been  altered,  the  accommo- 
dations and  equipment  are  modern  in  every  detail. 


BANKING  IN  THE  LAND  OF  VIKINGS 

received  deposits  on  interest  and  loaned  money  for 
six  months  or  a  year  on  security  in  hand  or  on  mort- 
gage. In  the  exchange  department,  depositors  by 
paying  an  extra  fee  had  the  privilege  of  drawing  on 
the  bank  by  check.  But  deposits  might  be  made  free 
if  they  did  not  bear  interest.  Thus  the  revenues  of 
the  King's  mines,  the  taxes  and  the  royal  court  cash 
were  kept  on  deposit  without  interest. 

Launched  under  government  auspices,  the  bank 
was  given  a  site  free  and  permitted  to  operate  a  spe- 
cial paper  mill  for  the  manufacture  of  bank  notes. 
This  government  favour  injured  the  business  of  the 
private  money  changers  and  bankers  and  they  started 
slanderous  rumours  regarding  the  conduct  of  the  in- 
stitution causing  a  run  on  the  bank,  which  was 
promptly  halted  by  a  royal  proclamation  denouncing 
these  misrepresentations. 

At  first  the  Bank  of  Sweden  was  prohibited  from 
issuing  notes,  but  in  1701  the  state  deputies  decided 
on  a  note  issue  as  a  separate  section  of  the  exchange 
department.  The  notes  were  made  transferable  but 
only  by  written  indorsement.  Nineteen  years  later 
these  notes  were  actually  at  a  premium,  possibly  be- 
cause of  their  great  convenience  in  business.  The 
currency  was  still  on  a  standard  of  copper  which  was, 
in  most  cases,  too  bulky  for  transfer. 

About  1717  Charles  XII  drew  heavily  against  the 
funds  of  the  bank,  to  such  an  extent  indeed,  that  its 

[117] 


BANKING  THROUGH  THE  AGES 

credit  was  impaired.  But  strangely  enough,  the 
exactions  of  Baron  Goetz,  who  was  afterward  be- 
headed, proved  of  benefit  to  the  bank.  He  de- 
manded that  the  people  deliver  their  gold  and  silver 
for  copper  checks,  or  tokens  of  coin,  and  they  hurried 
to  deposit  their  specie  in  the  bank.  Goetz  sought  to 
influence  the  King  to  seize  these  funds,  but  His  Maj- 
esty refused  and  in  consequence  the  bank  acquired  a 
great  reputation  for  security. 

This  was  lost,  however,  in  1740  when  government 
loans  had  forced  the  issue  of  unprotected  notes  until 
the  liabilities  reached  about  thirteen  times  the  coin 
reserve.  By  1750  the  notes  had  declined  in  value 
and  in  1776  a  readjustment  was  necessary  by  which 
the  old  notes  were  redeemed  at  fifty  per  cent  of  their 
face  value.  The  redemption  was  not  by  specie  but 
merely  by  new  transferable  notes  based  on  silver. 

By  this  time  the  finances  of  Sweden  had  come  a 
long  way  from  the  old  fur  currency  of  the  Vikings  and 
the  rest  is  merely  a  phase  of  modern  financial  history. 


[118] 


THE    OFFICIAL    BURNING   OF    THE   ASSIGNATS    IN    PARIS 
END    OF   EIGHTEENTH    CENTURY 


CHAPTER  XIII 

FINANCES  OF  THE  FRENCH  REVOLUTION 

IN  one  sense  the  French  Revolution  was  a  great 
bankruptcy.  It  was  the  outcome  of  bankruptcy 
and  it  resulted  in  bankruptcy.  Therefore  it  rep- 
resents the  one  period — and  the  most  violent  period — 
in  the  ferment  of  modern  civilization  when  banking 
was  virtually  suspended. 

The  beginning,  progress  and  culmination  of  that 
vast  cataclysm  we  call  the  Revolution  may  be 
summed  up  in  three  historic  epigrams.  The  first  is 
the  slogan  under  which  that  magnificent  monarch, 
Louis  XIV,  governed:  "The  state,  it  is  I."  The 
second  is  the  prophecy  of  his  successor,  Louis  XV: 
"After  me  the  Deluge."  And  the  third  is  that  fe- 
rocious reply  of  Danton's  to  armed  threats  against 
the  Republic:  "The  kings  of  Europe  would  chal- 
lenge us.     We  throw  them  the  head  of  a  king." 

It  was  the  grandiose  designs  of  Louis  XIV,  suc- 
cessful enough  at  first  but  all  at  last  winding  into  a 
weary  futility,  which  bled  France  white  and  even- 
tually resulted  in  the  loss  of  the  head  of  Louis  XVI. 
The  monarchy  was  exacting  in  its  demands  far  be- 
yond the  taxable  capacity  of  the  country.     The  na- 

[119] 


BANKING  THROUGH  THE  AGES 

tion,  or  at  least  its  favoured  few,  consumed  far  beyond 
its  power  of  production.  A  tower  of  luxury  and 
privilege  had  been  built  on  a  foundation  of  misery 
and  poverty.  Meanwhile  the  Encyclopaedists  and 
the  Physiocrats  wrote  and  preached  assiduously, 
hoping  to  philosophize  and  teach  the  coming  genera- 
tion. In  reality  they  sowed  in  men's  minds  those 
explosive  seeds  which  were  finally  to  blow  the  whole 
social  and  political  structure  to  atoms. 

But  in  the  beginning  the  Revolution  had  merely 
the  aspect  of  a  fiscal  reform. 

Toward  the  end  of  the  reign  of  Louis  XVI  all 
those  questionable  shifts  to  raise  money  which  so 
pleased  and  satisfied  his  queen,  Marie  Antoinette, 
had  failed.  The  financial  condition  of  the  govern- 
ment was  desperate.  The  national  debt  amounted 
to  6,000,000,000  livres,  or  about  $1,200,000,000. 
There  was  a  yearly  deficit  of  150,000,000  livres  which 
seemed  to  have  become  static. 

Underlying  all  this  was  a  tax  system  inexcusably 
unjust.  The  nobles,  who  held  title  to  one-third  of 
France,  and  the  clergy,  who  controlled  one-fifth,  paid 
no  land  tax  whatever.  This  left  a  grossly  dispro- 
portionate share  to  be  paid  by  the  common  people, 
or  Third  Estate.  The  people  also  paid  a  tithe,  or  in- 
come tax,  which  had  originally  been  one-tenth  of  the 
gross  production,  but  under  the  exactions  of  the  state 
had  risen  to  a  full  quarter. 

[120] 


FINANCES  OF  FRENCH  REVOLUTION 

As  a  result  economic  conditions  were  terrible. 
Most  of  the  industries  had  been  farmed  out  as  official 
monoplies.  It  cost  from  3,000  to  5,000  livres  to  be- 
come a  master  craftsman.  The  ordinary  labourer 
was  only  able  to  earn  about  a  bushel  of  wheat  a  week 
and  the  skilled  workman  about  half  again  as  much. 
Piled  on  top  of  this  were  an  almost  incredible  number 
of  legalized  corvees,  or  forced  labours  due  from  the 
peasants  to  the  nobles. 

To  consider  this  festering  situation  the  govern- 
ment convoked  the  States  General,  a  mediaeval  in- 
stitution faintly  analogous  to  the  British  Parliament, 
which  had  not  been  called  for  centuries.  To  the  as- 
sembled deputies  the  King  delivered  a  speech  urging 
a  reform  in  the  finances. 

The  Third  Estate,  or  commons,  having  by  far  the 
greater  number  of  votes,  promptly  took  matters  into 
its  own  hands  and  organized  a  national  assembly. 
At  its  demand  the  King  declared  on  June  23,  1789, 
less  than  two  months  after  the  calling  of  the  States 
General,  that  there  should  be  no  loans  or  taxes  with- 
out the  consent  of  the  deputies.  In  so  short  a  time 
France  had  changed  from  an  absolute  into  a  condi- 
tional monarchy.  Necker  proposed  a  tax  of  twenty- 
five  per  cent,  and  it  was  carried,  but  even  this  was 
wholly  inadequate  to  the  need  of  the  country. 

On  October  tenth,  Talleyrand  took  the  first  great 
step  toward  what  was  to  end  in  a  social  revolution. 

[121] 


BANKING  THROUGH  THE  AGES 

He  engineered  through  the  assembly  a  measure 
nationalizing  all  church  property.  This  was  a  com- 
plete expropriation,  though  the  State  agreed  to  con- 
tinue paying  clerical  salaries. 

Necker  also  sought  to  bolster  the  financial  situa- 
tion with  a  bill  to  make  the  Caisse  d'Escompte,  which 
was  a  private  banking  company  founded  in  1776,  a 
national  bank,  with  a  proviso  that  it  advance  170,- 
000,000  livres  to  the  treasury.  In  return  it  was  to 
have  the  privilege  of  issuing  240,000,000  livres  of 
national  bank  notes.  Unfortunately,  however,  this 
bank  was  already  in  a  shaky  condition  because  of 
previous  loans  wrung  from  it  by  the  government,  and 
it  was  considered  the  part  of  wisdom  to  lay  the  bill 
on  the  table. 

In  November  the  government  virtually  confessed 
bankruptcy  by  suspending  all  payments  until  Jan- 
uary 1,  1790.  Desperate  attempts  at  rehabilitation 
followed.  A  strange  plea  for  voluntary  gifts  was 
issued  and  produced  what  might  have  been  expected. 
Church  and  state  property  to  the  amount  of  400,- 
000,000  livres  was  ordered  sold.  Despite  the  fact 
that  184,000,000  livres  had  been  pried  out  of  the 
Caisse  d'Escompte,  it  was  forced  to  lend  the  govern- 
ment 80,000,000  livres  more. 

The  most  significant  step,  however,  and  typical  of 
the  frenzied  finance  of  the  revolution,  was  the  issue 
of  400,000,000  livres  in  assignats.     These  were  bonds 

[122] 


FINANCES  OF  FRENCH  REVOLUTION 

or  promissory  notes  secured  by  the  nationalized 
church  property,  the  public  domain,  and  later,  by  the 
estates  of  the  emigres.  The  first  issue  bore  interest 
at  five  per  cent  and  none  was  printed  with  a  face 
value  of  less  than  200  livres.  It  is  possible  to  justify 
this  first  attempt  to  stem  the  financial  tide  but  it 
soon  led  to  the  wildest  monetary  excesses.  On  April 
15,  1790,  the  interest  was  reduced  to  three  per  cent 
and  the  assignats  were  made  forced  legal  tender. 

On  September  twenty-ninth,  of  the  same  year  the 
limit  of  the  issue  of  assignats  was  raised  to  1,200,- 
000,000  livres  and  all  interest  on  every  issue,  not 
alone  of  the  present  and  future,  but  also  of  the  past, 
was  abolished.  The  Assembly  had  reversed  itself  in 
an  ex  post  facto  law.  Thus,  having  made  a  good 
start  with  the  assignats,  600,000,000  were  authorized 
on  June  19,  1791,  and  it  was  decided  to  issue  them  in 
smaller  denominations. 

All  this  time  innumerable  finance  committees  were 
at  work  with  a  firm  determination  to  solve  the  finan- 
cial problems  before  them  but  without  achieving  any 
commensurate  results.  The  difficulties  piled  up  for 
years  under  the  old  regime  and  fresh  crises  spring- 
ing from  unsettled  revolutionary  conditions  proved 
too  much  for  the  deputies. 

The  sale  of  the  national  estates,  embracing  chiefly 
the  old  church  properties,  did  not  yield  the  expected 
profit.     They  were  largely  sold  on  small  partial  pay- 

[123] 


BANKING  THROUGH  THE  AGES 

ments  and  the  nominal  purchasers  in  too  many  cases 
cut  down  the  timber,  got  rid  of  the  furnishings,  dis- 
posed of  everything  else  movable  and  simply  de- 
faulted on  the  subsequent  payments.  Perhaps  the 
only  beneficial  result  flowing  from  the  financial  re- 
forms of  the  Constituent  Assembly  was  the  abolition 
of  inequitable  taxes  and  the  detested  corvees. 

But  even  these  were  hastily  abolished  before  other 
and  better  sources  of  income  had  been  developed. 
As  a  result,  the  legislative  assembly  which  convened 
October  14,  1791,  was  obliged  to  issue  3,300,000,000 
livres  more  in  assignats  within  the  next  seven  months. 
Such  enormous  issues  could  have  but  one  effect. 
Value  began  to  evaporate  from  the  assignats.  Dur- 
ing the  year  1792  they  depreciated  from  seventy-two 
to  fifty-one  per  cent  of  their  face  value. 

On  January  25,  1793,  King  Louis  XVI  was 
guillotined.  War  with  most  of  the  rest  of  Eu- 
rope followed  as  a  matter  of  course.  Driven  on  by 
the  need  of  financing  its  campaigns,  the  new  republic 
once  more  resorted  to  an  issue  of  assignats.  The 
consequent  drop  in  their  value  was  as  sudden  as  it 
was  irretrievable.  By  July  they  had  reached  twenty- 
three  to  the  hundred. 

The  Convention  had  been  responsible  for  the  issue 
of  7,274,000,000  of  assignats.  But  the  Directory, 
infected  by  a  kind  of  frantic  insanity  to  raise  money, 
limited  the  issue  of  assignats  only  by  the  capacity  of 

[124] 


•H^rie  760 


HB5TS151 


11?   7  $2 


7i.°   7%% 


TJ-i  !!      se«JT76o" 


ONE    OF    THE    FRENCH    ASSIGNATS — 1792 


FINANCES  OF  FRENCH  REVOLUTION 

the  presses.  The  total  was  raised  to  45,578,000,000. 
The  price  to  which  they  fell  may  be  guessed. 

All  sorts  of  bolstering  legislation  was  attempted. 
Various  severe  terms  of  imprisonment  were  decreed 
for  those  who  refused  to  accept  them  as  legal  tender. 
But  the  people,  now  finally  aware  of  the  value  of  such 
legal  tender,  simply  hoarded  their  metal  money  and 
this  disappeared  entirely  from  circulation.  In  terms 
of  assignats,  the  prices  of  commodities  rose  enor- 
mously. Sugar,  for  example,  sold  at  400  livres  a 
pound.     Soap  brought  230  livres  a  pound. 

The  frenzy  of  the  revolution  had  now  spent  itself, 
but  not  its  effects.  When  Napoleon  set  out  on  Feb- 
ruary 23,  1796,  to  take  command  of  the  army  in  Italy, 
the  treasury,  exercising  the  utmost  exertion,  could 
raise  for  him  but  2,000  louis  in  coin.  This  he  carried 
in  his  carriage.  At  Nice  he  allotted  four  louis  to  each 
general,  but  the  amount  as  expressed  in  assignats 
seemed  fabulous.  Perhaps  at  this  time  the  assignats 
were  worth  one  per  cent  of  their  face  value. 

On  May  21,  1797,  all  assignats  were  demonetized 
and  repudiated. 

The  government  had  found  a  new  source  of  in- 
come— loot.  Its  armies  had  already  demonstrated 
their  ability  to  support  themselves  from  the  countries 
which  they  occupied.  Napoleon  discovered  that  he 
could  force  loans  so  successfully  from  the  Italian 
cities  that  he  could  not  only  finance  his  soldiery  but 

[125] 


BANKING  THROUGH  THE  AGES 

was  able  to  send  substantial  sums  to  the  government 
at  Paris. 

As  early  as  1796  the  necessity  for  a  national  bank 
had  been  foreseen.  But  it  was  only  after  the  coup 
d'etat  by  which  Napoleon  made  himself  First  Consul 
that  it  became  a  reality.  Napoleon  directed  M. 
Mollien  to  organize  the  Bank  of  France,  pointing 
out  the  commercial  losses  sustained  through  the  lack 
of  such  an  institution  and  the  advantages  to  industry 
inherent  in  its  operation.  At  first  the  bank  was  per- 
mitted to  transact  business  only  in  gold  and  silver, 
a  provision  due  to  poignant  experience  with  the  ill- 
fated  assignats. 

Subscriptions  for  the  new  bank  were  opened  in 
January,  1800.  It  was  capitalized  at  30,000,000 
francs,  split  into  30,000  shares  at  1,000  francs  each. 
As  a  gesture  of  approval  and  support  Napoleon  him- 
self subscribed  for  100  shares.  In  effect,  the  bank- 
ruptcy of  the  revolution  had  ended. 

Though  the  revolution  itself  had  ended,  it  left  in  its 
wake  a  disturbing  influence  that  lingered  long  in  the 
minds  of  men.  In  a  short  while  the  make-believe 
Mediaeval  Empire  which  Napoleon  so  spectacularly 
erected  was  also  to  end.  The  currency  convulsions 
which  shook  America  during  our  revolution,  as  well  as 
those  that  shook  France,  were  not  to  be  repeated  on 
any  such  national  scale  until  more  than  a  century 

[126] 


FINANCES  OF  FRENCH  REVOLUTION 

later.     The  world,  wearied  with  strife,  had  slowly  and 
reluctantly  decided  to  modernize  itself. 

For  more  than  a  decade  Europe  had  been  a  vast 
battlefield  with  its  national  boundaries  fluctuating 
like  tree  shadows  on  a  windy  day.  It  now  became  a 
congerie  of  nations  intent  on  restoring  some  measure 
of  prosperity,  and  some  semblance  of  social  order  and 
stability.  Overseas,  new  nations  were  rising  to 
power.  Colonies  were  springing  into  a  new  import- 
ance. Communications  were  being  reestablished. 
Trade  revived,  then  flourished.  And  the  banker 
resumed  his  natural  function. 

******* 

In  this  modern  world,  as  it  has  gradually  taken 
shape  from  the  wild  chaos  of  ancient  and  mediaeval 
times,  banking  has  assumed  a  significance  far  beyond 
what  could  have  been  anticipated  at  any  period  dur- 
ing the  early  history  of  civilization.  It  ceased  to  be 
the  convenience  of  a  class,  and  became  the  necessity  of 
a  people.  It  is  now  one  of  the  foremost  functions  of 
government.  Our  social  and  economic  organization 
is  inconceivable  without  the  great  banking  systems 
which  knit  the  whole  commercial  fabric  together. 
The  tide  of  our  prosperity  rises  and  falls  through, 
and  is  gauged  by  our  banking  institutions.  Our 
material  civilization  is  indeed  built  foursquare  on 
these  institutions  which  might  be  called  the  trans- 

[127] 


BANKING  THROUGH  THE  AGES 

formers  through  which  the  twin  currents  of  industry 
and  commerce  flow. 

Perhaps  the  future  historian  will  look  back  to  the 
boiling  commercial  activity  of  to-day  and,  pausing  for 
a  salient  phrase,  set  down  this  age  in  his  record  as 
The  Age  of  Banks. 


[128] 


University  of 
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